Citizen vigilantes stand at the entrance to Tierra Colorada, in Guerrero state on Mexico's Pacific Coast. A federal official called the decision by the anti-drug-cartel vigilantes to join in political protests a “Molotov cocktail.” (Bernardino Hernandez / Associated Press / March 27, 2013)

MEXICO CITY — Debate is intensifying over armed vigilante patrols that have sprung up in crime-plagued sections of rural Mexico, particularly in the state of Guerrero, where some patrols joined forces this week with a radical teachers union that has been wreaking havoc with massive protests, vandalism and violent confrontations with police.

The two groups, on the surface, would appear to have little in common. The vigilante patrols, typically made up of masked campesinos, are among dozens that have emerged in the countryside in recent months, purporting to protect their communities from the depredations of the drug cartels. The state-level teachers union, meanwhile, has taken to the streets to protest a sweeping education reform law backed by Mexican President Enrique Peña Nieto.

Their alliance was announced in a joint meeting Sunday. A leader of the vigilantes said they were joining with the teachers because it was the vigilantes' "watchword to fight against injustice."

The groups took part in their first joint demonstration this week in Chilpancingo, the capital of the southern state, which is home to the well-known resort city of Acapulco. The vigilantes apparently chose to march unarmed, and there were no reports of serious trouble.

But there is concern that an already-volatile series of political protests may take on a violent edge.

Before the alliance was announced, stick- and pipe-wielding members of the union, known as the State Coordinating Committee of Guerrero Education Workers, three times had blocked the key freeway connecting Mexico City and Acapulco, disrupting commerce during Acapulco's crucial spring break season.

Last week, some of the union protesters attacked federal police with homemade weapons as officers removed them from the road, according to police reports carried by Notimex, the state news agency. According to police, 15 officers were injured.

The vigilantes' decision to participate in political protests is an "unpleasant Molotov cocktail," Francisco Arroyo, president of Mexico's Chamber of Deputies, told reporters Tuesday. "A state that permits its citizens to arm themselves in order to achieve justice by their own hand is a failed state."

In general, the idea of aggrieved campesinos taking up arms and demanding justice resonates deeply in the national mythos, and the vigilantes have been embraced in some quarters. In January, Guerrero Gov. Angel Aguirre proposed giving salaries and uniforms to a group that patrols the city of Ayutla.

There have been problems, however. In February, a group in the Guerrero community of Las Mesas shot and injured two tourists headed to the beach who failed to stop at a vigilante roadblock. In March, federal authorities announced the arrest of 34 members of a self-defense group in the neighboring state of Michoacan, alleging they were connected to the drug cartel Jalisco Nueva Generacion.

The newspaper Reforma counted vigilante groups in 27 of Guerrero's 81 municipalities. The Peña Nieto government, which took power in December, has downplayed their presence as the administration tries to move the focus in Mexico away from the country's persistent violence and toward a package of reforms — including the controversial education reform law — that it hopes will spur a golden age of economic growth.

Peña Nieto was visiting Japan this week, hoping to drum up investment. At a news conference Tuesday, he was asked about the developments in Guerrero. He said the vigilantes' effort to take justice into their own hands was "beyond legality" and one "that my government will have to fight."

On Wednesday, protest leaders said their new group, which includes students and union members, would be called the Guerreran Popular Movement. On Thursday, hundreds of protesters again blocked the freeway to Acapulco.

Aguirre, the governor, told a reporter that he refused to be intimidated.

MEXICO - Violence recedes under Peña Nieto administrationOn 10 April 2013, Governance Secretary Miguel Ángel Osorio Chong presented the results of President Enrique Peña Nieto’s first security evaluation, confirming a reduction in violence. According to Osorio Chong, between the periods of August to November 2012 and December 2012 to March 2013, homicides decreased 17 percent and kidnapping dropped by 25 percent.

A series of drug-related killings in Cancun over the past week is the latest sign of an escalating turf war as the Gulf cartel tries to expand its presence in the popular tourist destination. Authorities on April 14 discovered the bodies of seven people, all apparently strangled, in the backyard of a residence in the 102 region of the city. The residence was reportedly used for retail drug sales. The high number of victims, once atypical for Cancun, comes a month after a March 14 attack on a bar in Cancun where seven people were killed.

While there are no indications that the current turf war in Cancun will directly affect bystanders or tourists not participating in criminal activities, the killings will likely place additional pressure on security forces in Cancun, possibly distracting law enforcement from preventing the kind of petty crimes more likely to affect tourists.

One possible explanation for the uptick in Gulf cartel activity is that a faction of Los Zetas in Cancun recently broke away from the parent organization and declared itself to be part of the Gulf cartel. Because the Gulf cartel is a far less cohesive and hierarchical organization than other cartels such as the Sinaloa Federation, the Gulf cartel operating in Cancun may or may not be coordinating with the factions in northeastern Mexico.

Regardless of how the Gulf cartel's presence grew to the point of driving the inter-cartel conflict in Cancun, any resulting violence will force municipal, state and federal authorities to redirect their focus. As part of the effort to reinforce security in Cancun, the Quintana Roo state government announced April 15 the deployment of 150 additional state police officers. Still, should violence continue to rise and put additional pressure on security forces, petty crimes more likely to affect bystanders or visitors such as theft or extortion may increase, which in turn could damage Cancun's main industry if enough tourists are deterred.

Threats Against Foreign Companies in Michoacan

On April 15, unidentified individuals distributed pamphlets, ostensibly signed "Knights Templar," in various areas of Apatzingan, Michoacan state. The message on the pamphlets warned commercial vendors as well as specific companies to stop delivering goods to Buenavista Tomatlan and Tepalcatepec, two municipalities west of Apatzingan near the Jalisco state border. Among the companies mentioned is PepsiCo subsidiary Sabritas, which was the target of coordinated attacks by the Knights Templar in May 2012.

The next day, narcomantas appeared in Lazaro Cardenas, Michoacan state, as well as Apatzingan warning that the community police operating in Michoacan -- particularly Buenavista Tomatlan -- belong to the Knights Templar's principal rival in the region, Cartel de Jalisco Nueva Generacion.

It is still not clear whether the Knights Templar are the actual authors of the April 15 and April 16 messages, but, as noted above, the criminal organization has targeted companies such as Sabritas in the past. In addition to questions about the authorship of the narcomantas, it is unclear whether the message they contained about Cartel de Jalisco Nueva Generacion infiltrating the community police in Buenavista Tomatlan is true. Even if those rumors are unfounded, the Knights Templar may believe them to be true, which could lead to continued attacks against individuals residing in the stated municipalities as well as businesses operating in the region. Therefore, the threats against vendors and multinational corporations such as Sabritas likely signal an intent to target businesses in the area and should not be disregarded.

Editor's Note: We now offer the daily Mexico Security Monitor, an additional custom intelligence service geared toward organizations with operations or interests in the region and designed to provide more detailed and in-depth coverage of the situation. To learn more about this new fee-based custom service, visit www.stratfor.com/msm.

Editor's Note: This Security Weekly assesses the most significant cartel-related developments of the first quarter of 2013 and provides updated profiles of Mexico's powerful criminal cartels, as well as a forecast for the rest of this year. It's the executive summary of a more detailed report available to clients of our Mexico Security Monitor service.

Balkanization of Cartels

Since the late 1980s demise of the Guadalajara cartel, which controlled drug trade routes into the United States through most of Mexico, Mexican cartels have followed a trend of fracturing into more geographically compact, regional crime networks. This trend, which we are referring to as "Balkanization," has continued for more than two decades and has impacted all of the major cartel groups in Mexico. Indeed the Sinaloa Federation lost significant assets when the organizations run by Beltran Leyva and Ignacio Coronel split away from it. Los Zetas, currently the other most powerful cartel in Mexico, was formed when it split off from the Gulf cartel in 2010. Still these two organizations have fought hard to resist the trend of fracturing and have been able to grow despite being affected by it. This led to the polarized dynamic observed in 2011 when these two dominant Mexican cartels effectively split Mexican organized crime in two, with one group composed of Los Zetas and its allies and the other composed of the Sinaloa Federation and its allies.

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This trend toward polarization has since been reversed, however, as Balkanization has led to rising regional challenges to both organizations since 2012. Most notable among these is the split between the Cartel de Jalisco Nueva Generacion and the Sinaloa Federation. The Sinaloa Federation continues to struggle with regional crime groups for control in western Chihuahua state, northern Sinaloa state, Jalisco state and northern Sonora state. Similarly, Los Zetas saw several regional challengers in 2012. Two regional groups saw sharp increases in their operational capabilities during 2012 and through the first quarter of 2013. These were the Cartel de Jalisco Nueva Generacion and the Knights Templar.

The Beltran Leyva Organization provides another example of the regionalization of Mexican organized crime. It has become an umbrella of autonomous, and in some cases conflicting, groups. Many of the groups that emerged from it control specific geographic areas and fight among each other largely in isolation from the conflict between Los Zetas and the Sinaloa Federation. Many of these successor crime groups, such as the Independent Cartel of Acapulco, Los Rojos and Guerreros Unidos are currently fighting for their own geographic niches. As its name implies, the Independent Cartel of Acapulco mostly acts in Acapulco, while Los Rojos and Guerreros Unidos mostly act in Morelos state.

The ongoing fragmentation of Mexican cartels is not likely to reverse, at least not in the next few years. Despite this, while Los Zetas and the Sinaloa Federation continue to face new rivals and suffer from internal splintering, their resources are not necessarily declining. Neither criminal organization faces implosion or a substantial decline as a transnational criminal organization as a result of rising regional challengers. Both Los Zetas and the Sinaloa Federation continue to extend their drug trafficking operations on a transnational level, increasing both their influence and profits. Still, they will continue to face the new reality, in which they are forced to work with -- or fight -- regional groups.

Los Zetas

In Hidalgo state, a former Zetas stronghold, the Knights Templar have made significant inroads, although violence has not risen to the level of that in the previously mentioned states. Also, the turf war within Nuevo Leon and Tamaulipas states between the Gulf cartel and Los Zetas that began when Los Zetas split from the Gulf cartel in 2010 continues.

In light of Ivan "El Taliban" Velazquez Caballero's dissent from Los Zetas and the death of former leader Heriberto "El Lazca" Lazcano Lazcano, Zetas leader Miguel "Z-40" Trevino Morales could face organizational integrity issues during 2013. Signs of such issues appeared in Cancun during the first quarter when some members of Los Zetas reportedly broke from the group and adopted the Gulf cartel name. Besides possible minor dissent, a seemingly new rival has emerged in Tabasco state to counter Los Zetas. A group called Pueblo Unido Contra la Delincuencia, Spanish for "People United Against Crime," carried out a series of executions in Tabasco state throughout the first quarter, but the group's origins and significance remain unclear. No indicators of substantial splintering among Los Zetas have emerged since the Velazquez split.

Sinaloa Federation

Regional organizations continued to challenge the Sinaloa Federation on its turf in western Chihuahua state, northern Sinaloa state and Jalisco state through the first quarter. Intercartel violence in mountainous western Chihuahua continues as the Sinaloa Federation fights La Linea for control of the region's smuggling routes and drug cultivation areas. Los Mazatlecos so far has maintained its control over northern Sinaloa cities, such as Los Mochis and Guasave. It also has continued violent incursions into southern areas of Sinaloa state, such as Mazatlan, Concordia and El Rosario with its ally Los Zetas.

Gulf Cartel

At the beginning of 2012, Gulf cartel territory appeared likely to be absorbed by larger cartels -- essentially signaling the end of the Gulf cartel. Support from the Sinaloa Federation and the Knights Templar combined with fractures within Los Zetas allowed a Gulf cartel resurgence, leading to a renewed Gulf assault on Los Zetas in the northeastern states of Mexico. The resurgence ended with a series of notable arrests during the last quarter of 2012, such as that of former top leader Jorge Eduardo "El Coss" Costilla Sanchez. The arrests triggered additional Gulf cartel infighting, which peaked in March 2013.

The escalated infighting in the Gulf cartel, particularly in Reynosa, Tamaulipas state, highlighted the new state of the Gulf cartel: Instead of operating as a cohesive criminal network, the Gulf cartel now consists of factions linked by history and the Gulf label. The infighting began in 2010 after the death of former top Gulf cartel leader Antonio Ezequiel "Tony Tormenta" Cardenas Guillen. The death of Cardenas Guillen split the Gulf cartel into two main factions, Los Rojos and Los Metros. By the first quarter of 2013, infighting had broken out between Los Metros leaders, such as Mario "Pelon" Ramirez Trevino, David "Metro 4" Salgado and Miguel "El Gringo" Villarreal. This suggests the Gulf cartel is further fractured and no longer consists of just two opposing sides. The Gulf cartel may begin acting as a cohesive network during the second quarter after the escalated infighting in March, though this cannot be definitely predicted.

From March 10 to March 19, Reynosa became the focal point for Gulf cartel infighting as Ramirez Trevino escalated his conflict against Villarreal. Ramirez Trevino reportedly expelled Villarreal's faction and its allies from the Reynosa plaza and killed Salgado. This could mean Ramirez Trevino has consolidated control over other Gulf cartel factions. If true, this would represent a substantial shift in organized criminal operations in northeastern Tamaulipas state, where the Sinaloa Federation and the Knights Templar smuggle drugs, people and other illicit commodities through the border towns of Reynosa and Matamoros while Los Zetas maintain a constant interest in fighting for control of the stated cities.

As mentioned during the last annual update, Gulf cartel factions are increasingly reliant on Sinaloa Federation and Knights Templar support to defend the remaining Gulf cartel territory in Tamaulipas state from Los Zetas. This certainly remains true after the first quarter, although the recent shift from Gulf cartel infighting may signal a shift in intercartel dynamics. Since the Gulf cartel in reality consists of separate factions, there is likely a separate relationship between each Gulf cartel faction and the larger criminal organizations reportedly in alignment with them. With Ramirez Trevino now in charge of Reynosa, a city valued by both the Sinaloa Federation and the Knights Templar, his existing relationship with the two organizations will likely influence their strategies for maintaining their interests in Gulf cartel-controlled areas. Additionally, it is not yet clear whether Ramirez Trevino suffered any substantial losses during the March fighting in Reynosa. If he did lose some capabilities fighting Los Zetas in Tamaulipas state, or if he has challenged a faction loyal to either the Sinaloa Federation or the Knights Templar, either organization would likely have to use its own gunmen for defending Gulf cartel-controlled areas or mounting their own incursions into Zetas territory, particularly Nuevo Laredo.

Intercartel violence in the Gulf cartel-controlled city of Reynosa will likely diminish compared to the first quarter of 2013 if Ramirez Trevino has indeed won. This reduction in violence will continue only as long as Ramirez Trevino is able to hold his control over Reynosa. Influence from external organizations, such as Los Zetas, the Sinaloa Federation and the Knights Templar, could once again spark violence if Ramirez Trevino's efforts have harmed their trafficking operations through Reynosa or presented a new opportunity to seize control. What, if any, Gulf cartel infighting is ongoing is difficult to gauge.

Cartel de Jalisco Nueva Generacion

The severing of the relationship between the Cartel de Jalisco Nueva Generacion and the Sinaloa Federation came to the forefront of conflicts in the Pacific states of Michoacan and Jalisco during the first quarter of 2013. The Sinaloa Federation relied on its alliance with the Cartel de Jalisco Nueva Generacion in defending the critical location of Guadalajara from Los Zetas and used the Cartel de Jalisco Nueva Generacion as an assault force into Los Zetas strongholds, such as Veracruz state.

Although evidence of the rift between the Cartel de Jalisco Nueva Generacion and the Sinaloa Federation began to appear in open-source reporting during the last half of 2012, the conflict between the two organizations only became clear when the Cartel de Jalisco Nueva Generacion went on the offensive in Jalisco state by attacking Sinaloa Federation allies Los Coroneles, the Knights Templar and the Gulf cartel.

With a now-fully independent Cartel de Jalisco Nueva Generacion, the polarization of warring cartels in Mexico has effectively ended. In addition to the existing conflicts between the Sinaloa Federation and Los Zetas, the Sinaloa Federation must now focus on reclaiming an operational hold over Jalisco state from the now-rival Cartel de Jalisco Nueva Generacion. The second quarter will continue to see a conflict between the Cartel de Jalisco Nueva Generacion and Sinaloa Federation-aligned groups in Jalisco state as well as neighboring states like Michoacan.

Knights Templar

The Knights Templar experienced intensified conflict during the first quarter from their principal rival, Cartel de Jalisco Nueva Generacion. In an effort to combat the Cartel de Jalisco Nueva Generacion, the Knights Templar have allied with other Sinaloa Federation-aligned groups, the Gulf cartel and Los Coroneles, referring to themselves as "Los Aliados" to fight the Cartel de Jalisco Nueva Generacion within Jalisco. Violence as a result of this alliance against the Cartel de Jalisco Nueva Generacion has been most notable in the Guadalajara metropolitan area as well as towns lying on highways 15 and 90, which connect to Guadalajara.

In addition to the Knights Templar offensive into Jalisco state, the group is currently defending its stronghold of Michoacan state. The Cartel de Jalisco Nueva Generacion also has conducted violent assaults against the Knights Templar in Michoacan, particularly on routes leading from Jalisco state toward Apatzingan, Michoacan state. This assault has increased intercartel violence along the border of the two states as part of a tit-for-tat dynamic.

Citizens of Buenavista Tomatlan, Michoacan state, a municipality lying amid territory contested by the Cartel de Jalisco Nueva Generacion and the Knights Templar, have recently set up a community police force to counter Knights Templar operations in the municipality. As in some other areas of Mexico, this community police force is a volunteer force that assumed law enforcement responsibilities independent of the Mexican government. The community police, while established to thwart the Knights Templar, have created tension between the communities of Buenavista Tomatlan and the government. On March 8, the Mexican military detained approximately 34 members of the community police force that had been created in February in Buenavista Tomatlan.

The Buenavista Tomatlan arrests occurred after the community police took over the municipal police station March 4 and detained the municipal police chief, who the Mexican military later freed. Notably, the Mexican government claimed at least 30 of the detained community police belonged to the Cartel de Jalisco Nueva Generacion. If true, this suggests it has made territorial gains to the point of infiltrating the community police. However, there has been no confirmation on whether the accusations are true. Regardless, the community police force of Buenavista Tomatlan has placed its focus on stopping Knights Templar operations in the area, a focus that could only benefit the Cartel de Jalisco Nueva Generacion's war with its rivals..

Federal police have detained Daniel "El Danny" Garcia Avila, leader of the criminal organization Los Dannys, also known as Cartel del Poniente, in Zacatecas state, Mexican officials announced April 19. Los Dannys are a regional crime group operating in the Comarca Lagunera metropolitan area, which encompasses the cities of Torreon, Coahuila state; Gomez Palacio, Durango state; Lerdo, Durango state; and Matamoros, Coahuila state. While Garcia Avila's arrest could hurt Los Dannys, violence in the area is unlikely to abate.

Though much of the violence in Coahuila is related to a turf war between Los Zetas and the Sinaloa Federation, increasing regional challenges from independent criminal groups like Los Dannys have made a substantial contribution. This regionalization of organized crime has increased the number of actors capable of contesting areas such as Torreon.

According to local authorities, Los Dannys have been responsible for a series of attacks against law enforcement officials in the area, in addition to other high-profile attacks. Whether the arrest of Daniel Garcia Avila will see Los Dannys' ability to operate diminish or whether another capable leader will step in remains unclear. Violence is likely to continue either way, since both Los Zetas and the Sinaloa Federation remain locked in combat for control of the region.

Violence in Tijuana

Authorities discovered the body of Edwin Jael Valencia Godinez, a leader within a Tijuana-based organized crime group under Jose Luis "El Guero Chompas" Mendoza Uriarte, on April 21 in Tijuana, Baja California state. His death follows the April 17 killing of Victor "El Sargento" Manuel Garcia, a leader of the local crime group Los Talibanes. The executions are part of a sharp increase in organized crime-related violence in Baja California state.

Violence in Tijuana and the rest of Baja California sharply declined after 2008 when the Sinaloa Federation largely bested the Arellano Felix Organization. Since then, the Arellano Felix Organization has maintained control of Tijuana, but in a subordinate role to the Sinaloa Federation. This relationship is by no means permanent. A new challenge to the Sinaloa Federation in Tijuana would not be surprising -- and would reflect another step in the Balkanization of Mexican organized crime.

Violence in Baja California state resulting from warring local criminal cells would harm Sinaloa Federation interests by drawing additional law enforcement attention to the lucrative border city of Tijuana. Indeed, unconfirmed Mexican media reports stated that Sinaloa Federation leader Ismael "Mayo" Zambada Garcia has ordered his lieutenants operating in Tijuana to halt the increase in violence. If correct, this shows a lack of control by Sinaloa Federation, since violence has not subsided. However, should the violence prove to be direct challenges to the Sinaloa Federation, then violence could intensify even more. Tijuana provides a critical port of entry into the United States, meaning the Sinaloa Federation would do everything it could to defend its operations in the area.

MEXICO CITY — Andrea Benítez simply did what many rich, connected Mexicans have always done: she used her influence to step on the lower born. Witnesses said that when she was not given the table she wanted on Friday at Maximo Bistrot, a popular Mexico City restaurant, she called in inspectors who worked for her father at the country’s main consumer protection agency to shut it down.

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“Dreadful service,” she wrote on Twitter, before announcing she had arrived at the agency to complain. “They have no manners.”

What followed, however, caught much of Mexico by surprise. Instead of enjoying the perks of privilege, Ms. Benítez and her father have become the targets of a broad and swift social media campaign — with tens of thousands of Tweets condemning them — that led the president’s office on Monday to announce a formal investigation into allegations of abuse of power.

This kind of response, it must be said, is exceedingly rare in Mexico. Murders are routinely ignored by the authorities here, and increasingly by senior officials who would prefer to discuss other topics. But the food at Maximo Bistrot apparently has the capacity to ignite public rage and government action like little else.

To many of its fans, the restaurant is the Chez Panisse of Mexico City, a gastro-paradise of fresh ingredients delivered with innovation for (relatively) affordable prices, in a simple dining room often populated by stars, from Mexican actors to visiting luminaries like Patti Smith. It is one of many new restaurants here that have sought to reinvent Mexican cuisine, taking advantage of both a booming economy and the fact that food is an economic exception — one of the only industries where Mexico’s monopolistic tendencies do not hold sway.

Many of the restaurant’s regular patrons said the young Ms. Benítez clearly miscalculated by assuming that all the smartphone owners at dinner would let her get away with such behavior.

“It’s such blatant corruption that’s right in our faces,” said Max St. Romain, 42, a filmmaker who saw the inspectors slap an enormous “suspension of activities” sticker on Maximo Bistrot on Friday night. “It’s a connection to the corruption that ruled Mexico for decades — the fact that a child of someone in power can use it just on a whim, on a tantrum.”

Twitter users immediately gave Ms. Benítez a hashtag: #LadyProfeco. Profeco is the abbreviated version of the office that her father directs, and “Lady” referred back to another recent incident labeled #LadiesDePolanco — when some drunken young women in the posh neighborhood of Polanco were caught on video berating police officers for being “salary men.”

As of Sunday evening, Twitter had logged around 42,000 messages referring to #LadyProfeco in every manner of vulgar insult.

The Net vigilantism, nonetheless, has not let up. Few of the Benítezes’ critics seem to expect a real investigation, so they are again turning to digital outrage and humor. One artist even turned Lady Profeco into a satirical comic book heroine.

“Is there a business that’s given you bad service?” she is depicted as saying on the cover. “Talk to me and I’ll tell my daddy to shut it down.”

The movie "Traffic" tells the story of a Mexican informant who helps the U.S. fight drug trafficking from Mexico. But there are many details in the film that aren't at all like the reality of the life of Luis Octavio López Vega, an informant abandoned by the Americans and sought by Mexican authorities who accuse him of colluding in narcotics trafficking. Watch this video about the differences between Hollywood and real life in the Drug War.

Mexico Security Memo: Challenges to the Knights Templar in MichoacanStratfor

The conflict between the Knights Templar and the self-defense groups, also commonly referred to as community police, continues to escalate with violent acts and Knights Templar propaganda in Michoacan state near the border with Jalisco state. The Buenavista Tomatlan and Tepalcatepec municipalities have experienced the quickest increases in violence, extortion and embargos on local industries due to the ongoing conflict between Knights Templar and the self-defense groups.

On May 5, authorities discovered several narcomantas in Apatzingan, which is connected to both aforementioned municipalities by Highway 120 to the east. The messages denounced the self-defense groups, claiming they are associated with Cartel de Jalisco Nueva Generacion, the now-principal rival of the Knights Templar in states such as Jalisco, Michoacan, Guanajuato and Guerrero. Regardless of any validity behind the messages, the focus on connecting the self-defense groups to the Cartel de Jalisco Nueva Generacion shows an increasing urgency for the Knights Templar to defend their stronghold state from Cartel de Jalisco Nueva Generacion and the expanding self-defense groups in Mexican communities.

The self-defense groups emerged in Buenavista Tomatlan in February as a response to escalating conflict between the Knights Templar and Cartel de Jalisco Nueva Generacion. Since then, Knights Templar propaganda has shifted its focus from targeting Los Zetas to targeting the self-defense groups. During 2012, Los Zetas were the primary rival for the Knights Templar because they continually threatened Knights Templar routes to the United States through northeastern Mexico. But the conflict with Cartel de Jalisco Nueva Generacion is a more immediate threat to the Knights Templar because of the former's proximity to the Knight's Templar stronghold in Michoacan. Moreover, the appearance of the self-defense groups brought additional challenges for the group.

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In addition to propaganda and violent assaults, the Knights Templar have attempted to impose embargos on the municipalities that host self-defense groups in Michoacan. On April 15, unidentified individuals distributed pamphlets, ostensibly signed by the Knights Templar, in various areas of Apatzingan, Michoacan state. The message on the pamphlets warned vendors in general and some companies in particular to stop delivering goods to Buenavista Tomatlan and Tepalcatepec.

Regardless of the validity of the claims that self-defense groups are colluding with the Cartel de Jalisco Nueva Generacion, the groups augment the threat that the neighboring cartel poses to the Knights Templar. Additionally, the self-defense groups' ability to police their respective communities competes with the publicly stated intent of the Knights Templar to provide public services in the communities in which they operate. Should more self-defense groups also countering Knights Templar interests emerge in Michoacan, the cartel could expect to lose some freedom to maneuver in its local criminal enterprises within its stronghold.

It does not appear that the Knights Templar are in immediate danger of losing significant territory. However, it is likely the operations of self-defense groups in Michoacan state have favored the Cartel de Jalisco Nueva Generacion in their current conflict with Knights Templar. Because of this, violence in Michoacan state, particularly west of Apatzingan, will likely continue at current levels and could further escalate if more self-defense groups emerge or if existing ones improve in their tactical capabilities.

Mexico, Where Teachers Take HostagesPresident Enrique Peña Nieto needs to show the country that he will defend the rule of law.By MARY ANASTASIA O'GRADY

Mexican students studying to be teachers released a hostage on Wednesday—in the municipality of Nahuatzen—due to concerns about his health. But they continue to hold five others. The students are supported by the Michoacán State Teachers Organization, which warned that the remaining captives, who are state policemen, would be freed only when a demand for 1,200 new teaching jobs is met.Related Video

WSJ's "Americas" columnist Mary Anastasia O'Grady talks with James Freeman about the tension between teachers unions in Mexico and newly elected President Enrique Peña Nieto. Photo: Associated Press.

The Mexican standoff, now a week old, is only the latest example of a teacher-union rebellion against recent amendments to the Mexican constitution aimed at improving public education.

Institutional Revolutionary Party President Enrique Peña Nieto has made it a priority to fix the broken public-education system. But eager reformers are often tested by politically powerful interests in their first year in office. The teachers believe they can make him back down.

Over the 71 consecutive years that the PRI ruled Mexico until 2000, it earned a reputation for heavy-handedness bordering on repression. Now that it is finally back in power, there is pressure on Mr. Peña Nieto to show that his party is kinder and gentler. This may tempt him to tolerate union violence. But the recent constitutional amendments increase transparency and accountability and depoliticize education. This is the change the PRI needs to show the public it supports.

It's easy to see why teachers are up in arms over the amendments. For the first time ever they will be vetted in a comprehensive process that includes proficiency exams. Lifetime tenure will no longer be guaranteed from the day a teacher graduates from a teaching college. Teachers will not be allowed to pass their tenured posts to relatives, the prevalent practice of selling a teaching post will be outlawed, and promotions will require evaluation. In short, teaching is to be like a real job, where performance matters.

Accountability is a foreign concept for many who go into teaching, which explains why teaching students are part of the rebellion. In April, violence broke out in Chilpancingo, the state capital of Guerrero, when the state legislature refused a request by activists to reject the new evaluation process. Union thugs vandalized property. They also blocked the highway that runs from Mexico City, through Chilpancingo, to Acapulco, with serious economic consequences. Most teachers unions at least pretend to care about their students. Many striking teachers in Mexico just walked off the job, leaving children and parents in the lurch.

Mr. Peña Nieto is leading a nation that long ago outgrew the labor laws that govern teaching. When the North American Free Trade Agreement was born in 1994, many expected Mexico to use it to become a magnet for low-skill, low-tech industries. But openness raises living standards, and destinations outside of Nafta soon became more attractive for investors seeking low-wage labor.

Mexico naturally moved up the food chain. Today it increasingly hosts middle- and high-tech industries, including aerospace. According to the ministry of the economy, "There are over 190 companies within the aerospace industry operating in Mexico, employing nearly 30,000 workers" and the aerospace market is undergoing "rapid growth."

Will Mexico have the human capital needed for that growth and the other economic changes that will accompany it? The education ministry claims that every year 90,000 Mexicans complete graduate programs in engineering and technology. But the public-education system could hold the country back.

In very poor countries, access to education is the first hurdle to clear. But step two, which Mexico now faces, is the quality challenge. Claudio X. González, president of Mexicanos Primero (Mexicans First), a nongovernmental organization, is working to build public support for reform. He says "only one quarter of each generation finishes high school," and only "10% finish their college degree." What is more, "up to 80% of each generation fails or barely passes international tests in reading comprehension, math and science."

Mexico ranks 34th out of the 34 countries in the Organization for Economic Cooperation and Development in basic education achievement. Mexicanos Primero reports that Guerrero, Oaxaca and Michoácan, where much of the union violence has taken place, have the nation's worst secondary-education outcomes.

Notes Mr. González: "No country in the OECD spends as much on education, as a percentage of GDP, as Mexico. Still, we have no reliable registry of teachers and close to 160,000 people [are paid] a salary as teachers but never step into a classroom."

Mexico's elected representatives have voted to reform a corporatist education model built in the 1930s. Now the state is charged with enforcing the change. It should also prosecute vandals and kidnappers. If it does, it won't only defend the interest of millions of children but it will also be a step closer to implementing the rule of law in a country where it is sorely lacking.

Stratfor Analysis Recent body dumps and targeted attacks in northern parts of Sinaloa state reveal an unfolding conflict among regional organized criminal groups with backing from some of Mexico's major cartels. Since April, media outlets have attributed at least two body dumps in Los Mochis, Ahome municipality's largest city, to a group calling itself La Mochomera. The group's origins and allegiances remain unclear, but the escalating violence in the state suggests that a new challenge to Los Mazatlecos -- the current dominant organization in Ahome -- is underway.According to social media reports, La Mochomera is a remnant of the former Beltran Leyva Organization, a Sinaloa-based cartel that split in 2009. The group has reportedly been fighting Los Mazatlecos, another Beltran Leyva Organization remnant that wrested control of parts of northern Sinaloa state over the past year. In 2012, Los Mazatlecos emerged as a regional challenger to Sinaloa Federation in Sinaloa state, and the group operates in some of the few areas in the state outside of Sinaloa's control.

The ability of Los Mazatlecos to counter the far stronger the Sinaloa Federation has been partly a result of its cooperation with La Linea and Los Zetas, two of the Sinaloa Federation's principal rivals. Before the breakup of the Beltran Leyva Organization, Los Zetas allied with some of the cartel's leaders, including Alfredo Beltran Leyva. Since the split, Los Zetas have maintained a working relationship with many of the remnant groups, most notably Los Mazatlecos, whose operations in Sinaloa state have allowed Los Zetas to make occasional incursions into territories controlled by the Sinaloa Federation and afforded access to the Sierra Madre Occidental, a lucrative region for illicit drug production.But the recent violence in Ahome indicates that La Mochomera is distinct from Los Mazatlecos. On April 20, authorities discovered six bodies inside an abandoned vehicle in Los Mochis, along with a narcomanta signed ostensibly by "El Dos Letras," presumably the nickname of the leader of La Mochomera. The message contained a threat to Ahome police chief Jesus Carrasco Ruiz and accused him of colluding with organized criminals. Then on May 4, authorities discovered another six bodies near Los Mochis and another narcomanta apparently signed by El Dos Letras. On May 9, a group of gunmen in Adolfo Ruiz Cortines, a community in Guasave municipality, ambushed a convoy ferrying the police chief to the city of Culiacan along Highway 15.In light of the recent threats against Carrasco Ruiz and the Ahome police, the May 9 attack can likely be linked to the body dumps on April 20 and May 4. The ability to ambush an armored police convoy with a high number of gunmen suggests the involvement of a more substantial regional criminal group, rather than a local gang. Thus, La Mochomera could be receiving support from an outside organization looking to counter Los Mazatlecos. It is also possible that the new group splintered from Los Mazatlecos or perhaps is a Los Mazatlecos faction still working to defend the group's territory.Stratfor has been unable to confirm whether the escalating conflict in northern Sinaloa state is indeed between La Mochomera and Los Mazatlecos as reported. If La Mochomera is aligned with or a part of Los Mazatlecos, then the recent violence could be the result of defensive operations against a rival, likely the Sinaloa Federation. If La Mochomera is challenging Los Mazatlecos, Los Zetas will likely respond to ensure its capabilities to conduct operations in the state and the Sierra Madre Occidental and to counter the Sinaloa Federation in the rival cartels' nationwide conflict. This would prolong high levels of violence for the foreseeable future.Editor's note: As part of a refocusing of our Mexico coverage to include more analysis of the geopolitical, economic and energy-related issues affecting the country, Stratfor is discontinuing publication of our weekly Mexico Security Memo. We will continue to publish analyses pertaining to the security situation in Mexico, but we will do so when events warrant the coverage rather than simply once a week.If you need access to more detailed intelligence and analysis on the security situation in Mexico, we will continue to offer a number of products and services specifically on that topic, including our Mexico Security Monitor, which you can subscribe to here. As always, we want your feedback. Please let us know what you think of our expanded coverage by sending an email to responses@stratfor.com.

Stratfor By Scott StewartVice President of AnalysisMexican President Enrique Pena Nieto's approach to combating Mexican drug cartels has been a much-discussed topic since well before he was elected. Indeed, in June 2011 -- more than a year before the July 2012 Mexican presidential election -- I wrote an analysis discussing rumors that, if elected, Pena Nieto was going to attempt to reach some sort of accommodation with Mexico's drug cartels in order to bring down the level of violence.Such rumors were certainly understandable, given the arrangement that had existed for many years between some senior members of Pena Nieto's Institutional Revolutionary Party and some powerful cartel figures during the Institutional Revolutionary Party's long reign in Mexico prior to the election of Vicente Fox of the National Action Party in 2000. However, as we argued in 2011 and repeated in March 2013, much has changed in Mexico since 2000, and the new reality in Mexico means that it would be impossible for the Pena Nieto administration to reach any sort of deal with the cartels even if it made an attempt.But the rumors of the Pena Nieto government reaching an accommodation with some cartel figures such as Joaquin "El Chapo" Guzman Loera have persisted, even as the Mexican government arrests key operatives in Guzman's network, such as Ines Coronel Barreras, Guzman's father-in-law, who was arrested May 1 in Agua Prieta, Mexico. Indeed, on April 27, Washington Post reporter Dana Priest published a detailed article outlining how U.S. authorities were fearful that the Mexican government was restructuring its security relationship with the U.S. government so that it could more easily reach an unofficial truce with cartel leaders. Yet four days later, Coronel -- a significant cartel figure -- was arrested in a joint operation between the Mexicans and Americans.Clearly, there is some confusion on the U.S. side about the approach the Pena Nieto government is taking, but conversations with both U.S. and Mexican officials reveal that these changes in Mexico's approach do not appear to be as drastic as some have feared. There will need to be adjustments on both sides of the border while organizational changes are underway in Mexico, but this does not mean that bilateral U.S.-Mexico cooperation will decline in the long term.Opportunities and ChallengesDespite the violence that has wracked Mexico over the past decade, the Mexican economy is booming. Arguably, the economy would be doing even better if potential investors were not concerned about cartel violence and street crime -- and if such criminal activity did not have such a significant impact on businesses operating in Mexico. Because of this, the Pena Nieto administration believes that it is critical to reduce the overall level of violence in the country. Essentially it wants to transform the cartel issue into a law enforcement problem, something handled by the Interior Ministry and the national police, rather than a national security problem handled by the Mexican military and the Center for Research and National Security (Mexico's national-level intelligence agency). In many ways the Pena Nieto administration wants to follow the model of the government of Colombia, which has never been able to stop trafficking in its territory but was able to defeat the powerful Medellin and Cali cartels and relegate their successor organizations to a law enforcement problem. The Mexicans also believe that if they can attenuate cartel violence, they will be able to free up law enforcement forces to tackle common crime instead of focusing nearly all their resources on containing the cartel wars. Although the cartels have not yet been taken down to the point of being a law enforcement problem, the Pena Nieto administration wants to continue to signal this shift in approach by moving the focus of its efforts against the cartels to the Interior Ministry. Unlike former Mexican President Felipe Calderon, who was seen leading the charge against the cartels during his administration, Pena Nieto wants to maintain some distance from the struggle against the cartels (at least publicly). Pena Nieto seeks to portray the cartels as a secondary issue that does not demand his personal leadership and attention. He can then publicly focus his efforts on issues he deems critically important to Mexico's future, like education reform, banking reform, energy reform and fostering the Mexican economy. This is the most significant difference between the Calderon and Pena Nieto administrations.Of course it is one thing to say that the cartels have become a secondary issue, and it is quite another to make it happen. The Mexican government still faces some real challenges in reducing the threat posed by the cartels. However, it is becoming clear that the Pena Nieto administration seeks to implement a holistic approach in an attempt to address the problems at the root of the violence that in some ways is quite reminiscent of counterinsurgency policy. The Mexicans view these underlying economic, cultural and sociological problems as issues that cannot be solved with force alone.Mexican officials in the current government say that the approach the Calderon administration took to fighting the cartels was wrong in that it sought to solve the problem of cartel violence by simply killing or arresting cartel figures. They claim that Calderon's approach did nothing to treat the underlying causes of the violence and that the cartels were able to recruit gunmen faster than the government could kill or capture them. (In some ways this is parallel to the U.S. government's approach in Yemen, where increases in missile strikes from unmanned aerial vehicles have increased, rather than reduced, the number of jihadists there.) In Mexico, when the cartels experienced trouble in recruiting enough gunmen, they were able to readily import them from Central America. However -- and this is very significant -- this holistic approach does not mean that the Pena Nieto administration wants to totally abandon kinetic operations against the cartels. An important pillar of any counterinsurgency campaign is providing security for the population. But rather than provoke random firefights with cartel gunmen by sending military patrols into cartel hot spots, the Pena Nieto team wants to be more targeted and intentional in its application of force. It seeks to take out the networks that hire and supply the gunmen, not just the gunmen themselves, and this will require all the tools in its counternarcotics portfolio -- not only force, but also things like intelligence, financial action (to target cartel finances), public health, institution building and anti-corruption efforts. The theory is that by providing security, stability and economic opportunity the government can undercut the cartels' ability to recruit youth who currently see little other options in life but to join the cartels. To truly succeed, especially in the most lawless areas, the Mexican government is going to have to begin to build institutions -- and public trust in those institutions -- from the ground up. The officials we have talked to hold Juarez up as an example they hope to follow in other locations, though they say they learned a lot of lessons in Juarez that will allow them to streamline their efforts elsewhere. Obviously, before they can begin building, they recognize that they will have to seize, consolidate and hold territory, and this is the role they envision for the newly created gendarmerie, or paramilitary police.The gendarmerie is important to this rebuilding effort because the military is incapable of serving in an investigative law enforcement role. They are deployed to pursue active shooters and target members of the cartels, but much of the crime affecting Mexico's citizens and companies falls outside the military's purview. The military also has a tendency to be heavy-handed, and reports of human rights abuses are quite common. Transforming from a national security to a law enforcement approach requires the formation of an effective police force that is able to conduct community policing while pursuing car thieves, extortionists, kidnappers and street gangs in addition to cartel gunmen.Certainly the U.S. government was very involved in the Calderon administration's kinetic approach to the cartel problem, as shown by the very heavy collaboration between the two governments. The collaboration was so heavy, in fact, that some incoming Pena Nieto administration figures were shocked by how integrated the Americans had become. The U.S. officials who told Dana Priest they were uncomfortable with the new Mexican government's approach to cartel violence were undoubtedly among those deeply involved in this process -- perhaps so deeply involved that they could not recognize that in the big picture, their approach was failing to reduce the violence in Mexico. Indeed, from the Mexican perspective, the U.S. efforts have been focused on reducing the flow of narcotics into the United States regardless of the impact of those efforts on Mexico's security environment.However, as seen by the May 1 arrest of Coronel, which a Mexican official described as a classic joint operation involving the U.S Drug Enforcement Administration and Mexican Federal Police, the Mexican authorities do intend to continue to work very closely with their American counterparts. But that cooperation must occur within the new framework established for the anti-cartel efforts. That means that plans for cooperation must be presented through the Mexican Interior Ministry so that the efforts can be centrally coordinated. Much of the current peer-to-peer cooperation can continue, but within that structure.Consolidation and CoordinationAs in the United States, the law enforcement and intelligence agencies in Mexico have terrible problems with coordination and information sharing. The current administration is attempting to correct this by centralizing the anti-cartel efforts at the federal level and by creating coordination centers to oversee operations in the various regions. These regional centers will collect information at the state and regional level and send it up to the national center. However, one huge factor inhibiting information sharing in Mexico -- and between the Americans and Mexicans -- is the longstanding problem of corruption in the Mexican government. In the past, drug czars, senior police officials and very senior politicians have been accused of being on cartel payrolls. This makes trust critical, and lack of trust has caused some Mexican and most American agencies to restrict the sharing of intelligence to only select, trusted contacts. Centralizing coordination will interfere with this selective information flow in the short term, and it is going to take time for this new coordination effort to earn the trust of both Mexican and American agencies. There remains fear that consolidation will also centralize corruption and make it easier for the cartels to gather intelligence.Another attempt at command control and coordination is in the Pena Nieto administration's current efforts to implement police consolidation at the state level. While corruption has reached into all levels of the Mexican government, it is unquestionably the most pervasive at the municipal level, and in past government operations entire municipal police departments have been fired for corruption. The idea is that if all police were brought under a unified state command, called "Mando Unico" in Spanish, the police would be better screened, trained and paid and therefore the force would be more professional.This concept of police consolidation at the state level is not a new idea; indeed, Calderon sought to do so under his administration, but it appears that Pena Nieto might have the political capital to make this happen, along with some other changes that Calderon wanted to implement but could not quite pull off. To date, Pena Nieto has had a great deal of success in garnering political support for his proposals, but the establishment of Mando Unico in each of Mexico's 31 states may perhaps be the toughest political struggle he has faced yet. If realized, Mando Unico will be an important step -- but only one step -- in the long process of institution building for the police at the state level. Aside from the political struggles, the Mexican government still faces very real challenges on the streets as it attempts to quell violence, reassert control over lawless areas and gain the trust of the public. The holistic plan laid out by the Pena Nieto administration sounds good on paper, but it will still require a great deal of leadership by Pena Nieto and his team to bring Mexico through the challenges it faces. They will obviously need to cooperate with the United States to succeed, but it has become clear that this cooperation will need to be on Mexico's terms and in accordance with the administration's new, holistic approach.

A ring of bleached sandstone caused by low water levels during a six-year drought surrounds Lake Powell, a Colorado River reservoir near Page, Arizona David McNew/Getty Images Summary An amendment to a standing water treaty between the United States and Mexico has received publicity over the past six months as an example of progress in water sharing agreements. But the amendment, called Minute 319, is simply a glimpse into ongoing mismanagement of the Colorado River on the U.S. side of the border. Over-allocation of the river's waters 90 years ago combined with increasing populations and economic growth in the river basin have created circumstances in which conservation efforts -- no matter how organized -- could be too little to overcome the projected water deficit that the Colorado River Basin will face in the next 20 years.Analysis In 1922, the seven U.S. states in the Colorado River Basin established a compact to distribute the resources of the river. A border between the Upper and Lower basins was defined at Lees Ferry, Ariz. The Upper Basin (Wyoming, Colorado, Utah and New Mexico) was allocated 9.25 billion cubic meters a year, and the Lower Basin (Arizona, California and Nevada) was allotted 10.45 billion cubic meters. Mexico was allowed an unspecified amount, which in 1944 was defined as 1.85 billion cubic meters a year. The Upper and Lower basins -- managed as separate organizations under the supervision of the U.S. Bureau of Reclamation -- divided their allocated water among the states in their jurisdictions. Numerous disputes arose, especially in the Lower Basin, regarding proper division of the water resources. But the use of (and disputes over) the Colorado River began long before these treaties.

As the United States' territory expanded to the west, the Colorado River briefly was considered a portal to the isolated frontier of the southwestern United States, since it was often cheaper to take a longer path via water to transport goods and people in the early 19th century. There was a short-lived effort to develop the Colorado River as the "Mississippi of the West." While places like Yuma, Ariz., became military and trading outposts, the geography and erratic flow of the Colorado made the river ultimately unsuitable for mass transportation. Navigating the river often required maneuvering around exposed sand banks and through shallow waters. The advent of the railroad ended the need for river transport in the region. Shortly thereafter, large and ambitious management projects, including the Hoover Dam, became the river's main purpose.Irrigation along the river started expanding in the second half of the 19th century, and agriculture still consumes more water from the Colorado than any other sector. Large-scale manipulation of the river began in the early 20th century, and now there are more than 20 major dams along the Colorado River, along with reservoirs such as Lake Powell and Lake Mead, and large canals that bring water to areas of the Imperial and Coachella valleys in southern California for irrigation and municipal supplies. User priority on the Colorado River is determined by the first "useful purposing" of the water. For example, the irrigated agriculture in California has priority over some municipal water supplies for Phoenix, Ariz.Inadequate Supply and Increasing DemandWhen the original total allocation of the river was set in the 1920s, it was far above regional consumption. But it was also more than the river could supply in the long term. The river was divided based on an estimated annual flow of roughly 21 billion cubic meters per year. More recent studies have indicated that the 20th century, and especially the 1920s, was a time of above-normal flows. These studies indicate that the long-term average of flow is closer to 18 billion cubic meters, with yearly flows ranging anywhere from roughly 6 billion cubic meters to nearly 25 billion cubic meters. As utilization has increased, the deficit between flow and allocation has become more apparent.Total allocations of river resources for the Upper and Lower basins and Mexico plus water lost to evaporation adds up to more than 21 billion cubic meters per year. Currently, the Upper Basin does not use the full portion of its allocation, and large reservoirs along the river can help meet the demand of the Lower Basin. Populations in the region are expected to increase; in some states, the population could double by 2030. A study released at the end of 2012 by the U.S. Bureau of Reclamation predicted a possible shortage of 3 billion cubic meters by 2035.The Colorado River provides water for irrigation of roughly 15 percent of the crops in the United States, including vegetables, fruits, cotton, alfalfa and hay. It also provides municipal water supplies for large cities, such as Phoenix, Tucson, Los Angeles, San Diego and Las Vegas, accounting for more than half of the water supply in many of these areas. Minute 319, signed in November 2012, gives Mexico a small amount of additional water in an attempt to restore the delta region. However, the macroeconomic impact on Mexico is minimal, since agriculture accounts for the majority of the river's use in Mexico but only about 3 percent of the gross domestic product of the Baja Norte province. There is an imbalance of power along the international border. The United States controls the headwaters of the Colorado River and also has a greater macroeconomic interest in maintaining the supply of water from the river. This can make individual amendments of the 1944 Treaty somewhat misleading. Because of the erratic nature of the river, the treaty effectively promises more water than the river can provide each year. Cooperation in conservation efforts and in finding alternative water sources on the U.S. side of the border, not treaty amendments, will become increasingly important as regional water use increases over the coming decades.Conservation Efforts Along the ColoradoThe U.S. Bureau of Reclamation oversees the whole river, but the management of each basin is separate. Additionally, within each basin, there are separate state management agencies and, within each state, separate regional management agencies. Given the number of participants, reaching agreements on the best method of conservation or the best alternative source of water is difficult. There are ongoing efforts at conservation, including lining canals to reduce seepage and programs to limit municipal water use. However, there is no basin-wide coordination. In a 2012 report, the Bureau of Reclamation compiled a list of suggested projects but stopped short of recommending a course of action. A similar report released in 2008 listed 12 general options including desalinization, vegetation management (elimination of water-intensive or invasive plants), water reuse, reduced use by power plants and joint management through water banking (water is stored either in reservoirs or in underground aquifers to use when needed). Various sources of water imports from other river basins or even icebergs are proposed as options, as is weather modification by seeding clouds in the Upper Basin. Implementation of all these options would result in an extra 5 billion cubic meters of water a year at most, which could erase the predicted deficit. However, this amount is unlikely, as it assumes maximum output from each technique and also assumes the implementation of all proposed methods, many of which are controversial either politically or environmentally and some of which are economically unviable. Additionally, many of the methods would take years to fully implement and produce their maximum capacity. Even then, a more reasonable estimate of conservation capacity would likely be closer to 1 billion-2 billion cubic meters, which would fall short of the projected deficit in 2035.The Potential for New DisputesConflict over water can arise when there are competing interests for limited resources. This is seen throughout the world with rivers that traverse borders in places like Central Asia and North Africa. For the Colorado River, the U.S.-Mexico border is likely less relevant to the competition for the river's resources than the artificial border drawn at Lees Ferry.Aside from growing populations, increased energy production from unconventional hydrocarbon sources in the Upper Basin has the potential to increase consumption. While this amount will likely be small compared to overall allocations, it emphasizes the value of water to the Upper Basin. Real or perceived threats to the Upper Basin's surplus of water could be seen as threats to economic growth in the region. At the same time, further water shortages could limit the potential for economic growth in the Lower Basin -- a situation that would only be exacerbated by growing populations.While necessary, conservation efforts and the search for alternative sources likely will not be able to make up for the predicted shortage. Amendments to the original treaty typically have been issued to address symptomatic problems. However, the core problem remains: More water is promised to river users than is available on average. While this problem has not come to a head yet, there may come a time when regional growth overtakes conservation efforts. It is then that renegotiation of the treaty with a more realistic view of the river's volume will become necessary. Any renegotiation will be filled with conflict, but most of that likely will be contained in the United States.

Umm , , , no one here is suggesting visiting the border region-- quite the contrary-- though I suspect quite a few people and businesses would be quite glad for the narco wars to settle down and for American tourists to come back.

In August or September 2013, Mexico will unveil the most ambitious of its legislative packages to date -- comprehensive reform of its energy sector. The reform is expected to include incremental improvements, such as tax, pension and subsidy reforms, and will focus on more long-term structural issues, such as changing the constitution to allow for improved partnership models that will increase foreign investment. For a number of economic and political reasons, this attempt at energy reform will be Mexico's best chance in decades to solve some of the sector's most pressing challenges.Analysis

By most metrics, Mexico's energy sector is performing poorly. Between 2004 and 2012, crude oil output fell by 25 percent, from 3.4 million barrels per day to 2.5 million barrels per day. Crude oil exports by volume declined 32 percent, from 1.9 million barrels per day to 1.3 million barrels per day over the same period. Natural gas output has been steadily declining since 2009, causing imports to spike. Over the past decade, proven reserves of crude oil have fallen 37 percent. Roughly a decade after nitrogen injection temporarily boosted production, output at Mexico's two most important fields, Cantarell and Ku-Maloob-Zaap, is either already declining or is expected to peak soon as the fields enter their natural decline phase.Mexico's Main Oil and Natural Gas Regions

As the output of cheaply produced crude oil from the Bay of Campeche drops, state-owned energy company Petroleos Mexicanos' profitability will also decline. To maintain production levels, Petroleos Mexicanos, better known as Pemex, needs to look beyond the shallow offshore areas, either into the deeper waters of the Gulf of Mexico or into unconventional exploration and production. This would require a massive upfront investment of money that Pemex simply does not have due to its unprofitable downstream sector and high tax burden. To solve this problem, Pemex must improve its tax, pension and subsidy liabilities and gain access to increased levels of capital, either from private domestic sources or foreign investors.

When low-cost oil and natural gas was readily available, Mexico did not need to confront the nationalist regulatory structure put in place in the first half of the 20th century that limited foreign ownership and investment. However, since the low-cost options (namely, oil produced at below $10 per barrel) are now in decline, decision-makers in Mexico are compelled to substantially rethink the regulatory framework. Nationalization and Reform

The current regulatory framework was formulated at three historical moments. In the immediate aftermath of the Mexican Revolution in 1917, Mexican leaders drafted a new constitution in which Article 27 declared subsurface mineral rights to be the inalienable property of the Mexican nation. Then in 1938, then-President Lazaro Cardenas nationalized the energy sector, expropriating foreign interests and creating Pemex, which would monopolize the entire Mexican oil industry. Most recently, the Petroleum Law of 1958 eliminated private oil mineral interests and extended Pemex's monopoly downstream to include all activities along the production chain.

Since 1999, successive administrations have attempted to reform the energy sector. In 1999, 2002 and 2008, former Presidents Ernesto Zedillo, Vicente Fox and Felipe Calderon each scored some minor victories -- including adding a degree of transparency and flexibility to Pemex and improving the company's ability to contract foreign firms -- but the issue of private investment was never definitively resolved.

In each of these three attempts, the timing was only partially conducive to success. Zedillo attempted to pass a reform bill near the end of his term when he was already a lame-duck president; Fox attempted just before midterm elections, while the energy sector and Pemex were still relatively healthy; and Calderon tried to reform the sector just after winning a close and contested election. Additionally, the Institutional Revolutionary Party's 12 years out of power from 2000 to 2012 after dominating Mexican politics for decades was characterized by political ill will and non-cooperation. By contrast, the situation facing current President Enrique Pena Nieto is categorically different and much more conducive to success. The Mexican economy is growing, it is still early in Pena Nieto's term and there is broad political consensus for the need for serious reform.Reform Options

Because the ruling Institutional Revolutionary Party does not control enough seats in either house of Mexico's Congress to pass an energy reform package on its own, let alone one that requires a constitutional amendment, any legislation will require the support of at least one of Mexico's two other major political parties. The National Action Party is the most likely partner, since it has been in favor of energy reform for the previous two administrations when it held the presidency and it sided with the Institutional Revolutionary Party in the recently passed Pact for Mexico reforms.

There are three major problems in the energy sector that can be fixed without amending the constitution. First, Mexico subsidizes the gasoline, diesel and liquid petroleum gas used in most Mexican homes, which has placed considerable stress on Pemex. In 2011, Pemex -- and by extension the Mexican government -- spent 1 percent of gross domestic product (or $12.5 billion) subsidizing fuel. Cutting these subsidies would be highly unpopular but would improve the bottom line of Pemex's downstream activities. To reduce these outlays without sparking social unrest, Mexico has already been gradually increasing the price of fuel over the past decade.

Second, the Mexican government relies on Pemex for 30 to 40 percent of its total fiscal revenues. Because it is a national oil company, Pemex has a tax regime and pension liabilities that are much greater than those of private firms. The Institutional Revolutionary Party needs to find a way to maintain public spending while reducing Pemex's tax burden. It is for this reason that the Pena Nieto administration may try to tackle energy and tax reform in tandem. It also explains why the government is trying to increase royalties on other sectors such as mining. However, diversifying streams of fiscal revenue is difficult, and potential alternatives, such as a value-added tax on things like food and medicine, are already prompting considerable social opposition.

Third, Pemex's pension fund is in need of reform. Under the current system, Pemex employees can retire at 55 with a pension worth their full salary. Currently, Pemex employs some 150,000 workers and pays full benefits to another 70,000 retirees. Knowing that pension reform is absolutely imperative, Pemex and the powerful oil workers' union are currently in negotiations with the government. While the details of the negotiation are unclear, there are two possible options: raising the retirement age to 65 or changing to a defined contribution model.

These reforms would certainly modernize Pemex and improve its efficiency but would not address Pemex and Mexico's main strategic imperative -- to pursue deep-water and unconventional exploration and production. With an estimated 30 billion to 50 billion barrels of oil in the deep waters of the Gulf of Mexico, and with an estimated 15.4 trillion cubic meters of shale gas and 13 billion barrels of shale oil resources, if Mexico is serious about expanding energy production, it must change the regulatory framework to allow for deeper partnerships with foreign companies. Exploiting these reserves is extremely capital intensive, and while Pemex could theoretically do it alone, it would be difficult to exploit the offshore and unconventional plays in a timely manner without outside support.

It has become increasingly clear over the past decade that in order to breathe life into the energy sector, international oil companies must be incentivized to invest money and technology into Mexico. However, because the 1958 Petroleum Law prohibited private ownership of mineral rights, the only types of partnerships that Pemex is allowed to enter into are service and leasing agreements. This model has failed to attract sufficient investor interest because no percentage of production, sales or profits can be used as a basis for compensation. Unable to book even a small percentage of reserves, these energy companies are unwilling to make expensive and risky investments. The most recent attempt, in 2008, to stimulate investment without touching the regulatory framework resulted in the Pemex Exploration and Production-model contract, which is a fee-based system with a potential for a bonus payment if production exceeds expectations. Nevertheless, because firms cannot book reserves under the existing model, few companies have responded enthusiastically.

Some new information about the secretly negotiated reform effort has recently been released. According to several high-level Mexican officials speaking with The Wall Street Journal, the new energy reform is expected to grant 25-year contracts in specific deep-water areas, develop a mechanism to allow foreign firms to book reserves and create a national petroleum agency that will administer the new partnership model. Pena Nieto has said that the reform will be made public in the next three months and will include "the constitutional changes needed to give private investors certainty." As a means to placate nationalistic sentiment, the government may try to devise a way to retain ownership over the oil reserves and pay oil firms in cash. This will certainly deter some investors, but the Mexican government is anticipating that the new terms will be attractive enough to sufficiently stimulate upstream investment. While the "Petrobras model" has been referred to as a point of reference, Mexico's energy reform will most likely be a case-specific solution that addresses Mexico's own unique priorities and constraints.Finding Common Ground

The main issues holding Mexico's energy sector back have been known and acknowledged for years, but this does not mean that the major players will agree upon a solution. Unlike the National Action Party, the Institutional Revolutionary Party is first and foremost a corporatist political entity. Its longevity in government is due to its ability to get a wide array of actors with seemingly divergent interests to agree to a common political program. Hence, the Institutional Revolutionary Party first needed to get its own house in order. Creating a reform bill that satisfies both the interests of the oil workers' union and those of the company's management is just one issue that the government has had to manage.

Once Pena Nieto gets the Institutional Revolutionary Party on board, he must strike an agreement with one of its rival political parties. The National Action Party is in many respects the most logical partner, since it has been trying to pass comprehensive energy reform for the past 12 years and would welcome the opportunity to pass it now, even if it cannot take sole credit for its passage. That said, the National Action Party knows it is indispensible to the reform's success, so it will try to exact as many concessions as possible. The leftist Democratic Revolutionary Party will flirt with the idea of energy reform but is unlikely to support a reform effort that would increase foreign or private participation in the energy sector. It may even use the energy issue to try to foment social unrest.

Mexico now has a better opportunity to enact comprehensive energy reform than at any point in recent decades. Ultimately, the success of that effort will depend on how successful the Institutional Revolutionary Party is at bringing in a rival political party without disturbing the careful balance of interests within its own ranks.

MONTERREY, Mexico — Rosa González cannot shake the memory of the state investigator who was too afraid of reprisals to take a full report, the police officer who shrugged when the ransom demand came, the months of agonizing doubt and, most of all, the final words from her daughter before she disappeared.World Twitter Logo.Connect With Us on Twitter

“I am giving you a hug because I love you so much,” her mentally disabled daughter, Brizeida, 23, told Rosa hours before she was abducted with her 21-year-old cousin after a party more than two years ago.

In thousands upon thousands of cases, the story may well have ended there, adding to the vast number of Mexicans who have disappeared. Unlike those in other Latin American countries who were victims of repressive governments, many of Mexico’s disappeared are casualties of the organized-crime and drug violence that has convulsed this nation for years.

But here in Nuevo León State, prosecutors, detectives, human rights workers and families are poring over cases together and in several instances cracking them, overcoming the thick walls of mistrust between civilians and the authorities to do the basic police work that is so often missing in this country, leaving countless crimes unsolved and unpunished.

About 26,000 missing-person reports sit in the federal government’s database, everything from drug-related abductions to runaways, and the administration of President Enrique Peña Nieto, who took office in December, has promised to do more to find out what happened.

Often, that would require the authorities to investigate themselves. This month, the national human rights commission said it was looking into 2,443 cases in which the police or military, corrupted by criminal gangs, appeared to be the abductors.

But public pressure from victims’ families and international groups has been mounting, repeatedly condemning the widespread failure to investigate the scourge of disappearances. After a series of protests by mothers of victims at the federal attorney general’s office in Mexico City, it announced two weeks ago that a unit was being assembled to delve into the cases.

“We are not doing magic,” the attorney general, Jesús Murillo Karam, told reporters at the announcement. “We are going to get as far as you can. We are going to exhaust all the options and speak with absolute truth about the possibility of results.”

Advocates for the victims remain skeptical, saying the real work needs to be done at the state and local level, where the cases are first reported and most investigators and leads reside.

Here in Nuevo León, one of the states hardest hit by violence, they have praised the prosecutor’s office for working with a local human rights group and family members to review several dozen cases, sometimes performing investigations that were never done in the first place.

Another look at Ms. González’s case last year helped lead the police to a gang leader who was arrested in January. He confessed to abducting and killing the women, and directed the authorities to the remains of the cousin; further testing of bones at the site is under way to determine if any belong to Ms. González’s daughter. “Whatever God may want,” Ms. González said through tears, “whether my daughter is alive or dead, I am resigned to whatever may come.”

Since agreeing in June 2011 to reopen dozens of cases, out of thousands here in the past several years, the authorities and their civilian counterparts have met monthly to go over leads and any progress made on them. Fifty-two cases have been resolved, with some people found dead and others alive, including 12 this year who were discovered to be in the custody of the authorities, unknown to their families. About 40 people have been arrested on abduction or homicide charges, 16 of them police officers.

“Nuevo León is one of the only states where you see prosecutors actually doing the due diligence of conducting investigations, meeting with families, going to the crime scene, taking common-sense steps to advance the investigation,” said Nik Steinberg, an investigator with Human Rights Watch, which in February published a damning report on the disappeared. “To search for the missing and find the people responsible for taking them, in Mexico where normally investigators don’t do any of that, that is progress.” ===================

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Mexico has only a rough sense of how many people have disappeared amid a surge of violence over the past several years that has left tens of thousands dead in battles between drug gangs, organized-crime groups, the police and the military.

Sometimes people vanish en masse; a dozen young people, two of them sons of convicted drug dealers, were kidnapped from a Mexico City bar last month and have not been found.

The federal government’s huge database of missing-person reports was compiled by the previous government, and last month the new interior secretary said the list was being combed through, expressing confidence that many cases were not abductions or the result of foul play, but rather more mundane instances of people leaving home and moving to new places, including the United States.

Still, many others are cold cases, with little forensic evidence to go on, witnesses who refuse to testify and concerted efforts by criminal gangs to do away with the bodies.

Maximina Hernández has been looking for six years for her son, José Lara Hernández, a police officer from a Monterrey suburb who apparently was intercepted on his way home from work and abducted by men in a sport utility vehicle. A witness saw the whole episode but refuses to give details to investigators, out of fear or possible involvement in the crime, she said.

“I don’t want to go against anybody,” she said. “I just want to know where my son is.”

Eduardo Ayala, who helps coordinate the investigations at the Nuevo León prosecutor’s office, acknowledged the challenge of the cases but said the authorities were making headway, in part because the state had fired about two-thirds of its police forces in a mass cleanup of corruption begun in 2011. “There is much left to do, but we are moving ahead,” he said. “The police now go to every corner of the state to investigate where they did not before.”

He said the state, working with the United Nations and experts from other countries, is writing a protocol to standardize how such cases should be handled.

Much of the impetus has come from Consuelo Morales, a Catholic nun who directs a local human rights organization known as Cadhac.

“We have a checklist,” she said. “Did they take a DNA sample, did they get cellphone records, if there was a license plate number of the car that took the victim did they check that?” Ms. Morales said that in many cases, initially, the answers were often no.

Ms. González, after chasing rumors that her daughter had been spotted in several other cities, took her case to Ms. Morales last November, two years after the abduction. They met with prosecutors and tracked down the case file, filling in details left out before and cross-matching it with current investigations.

The police were building a separate case against Jaime Cabello Figueroa, 40, an organized-crime boss who operated in the town where the women were seized. When he was detained in January, the police said he confessed to or was implicated in several killings and disappearances, including the case of Ms. González’s daughter and the cousin.

Ms. González now wants to speak directly to him, so he can see her pain and offer more information on her daughter. She said she had paid a ransom, but then contact with the captors ceased. The police never followed up, making her wonder if some were involved.

“They told me if I walk into that jail and talk to him, the bad guys will have eyes on me and have me followed outside,” she said. “But if they are going to kill me, they are going to kill me. I am fighting for my daughter to be found, wherever she is.”

Authorities seized more than $1 million and more than 41 million pesos on June 15, 2012. (Ronaldo Schemidt/AFP/GettyImages)Summary

In its fight against organized crime, the Mexican government is going after what is perhaps most valuable to criminal enterprises: their money and their bank accounts. On June 17, the government confirmed a new money laundering law that will help prevent cartels from washing their proceeds so easily. The law will take effect sometime around March 2014.

The new law will not bring an end to all money laundering operations in Mexico. Money launderers no doubt will adapt to and circumvent the new regulations. They may be able to use existing tactics less affected by the legislation, or they may exploit money laundering avenues outside those of their most reliable associates in the United States. However, improving the economy is a priority for Mexican President Enrique Pena Nieto, and if he can at least make such operations more difficult for criminal organizations and the corrupt businesses with which they transact, he may be able to improve the image of his country's regulatory environment enough to attract more foreign investment to Mexico.

Analysis

Mexico's political and economic environment has long been conducive to money laundering. Rampant corruption and inefficient regulation and enforcement have prevented previous administrations from effectively redressing the issue. But the blame also lies partly in the sophistication of Mexico's money launderers, who employ a multitude of methods to make their earnings appear legitimate.Methodology

Money laundering is broadly defined as the process by which illegally obtained earnings are made to appear legitimate. The oldest and simplest form of money laundering -- in Mexico as elsewhere -- is bulk cash smuggling. In Mexico this is done primarily in U.S. dollars. The advantages of smuggling are that it does not involve a third party or create a paper trail. Using this method, drug dealers sell their product in the United States and deposit the proceeds into U.S. banks. Otherwise, they smuggle the cash across the border and deposit it into Mexican banks.

They also use what is known as trade-based money laundering, which U.S. and Mexican intelligence agencies believe accounts for the highest percentage of laundered money in the world. In trade-based money laundering, criminals disguise money through seemingly legitimate commercial transactions. Transactions could take any number of forms: multiple shipments, phantom shipments or underreporting or overreporting shipments or payments. Frequently this technique involves the collusion of manufacturers and export/import firms, and typically it involves high-value goods that are subject to higher taxes and are in higher demand, such as electronics, luxury cars, textiles, precious metals and counterfeit goods.Money Laundering in Mexico: The Struggle to Track Illicit Gains Read more: Money Laundering in Mexico: The Struggle to Track Illicit Gains

For example, a criminal with $1 million to wash will use a front or shell company to purchase $10,000 worth of, say, computers from an oversees computer company. The computer company, which is privy to the arrangement, will falsify an invoice to show $1 million worth of computers sold, after which it will ship the computers, take a commission and wire the remainder of the money -- in this case, $990,000 less the commission and merchandise -- to the original front company. The launderer can then sell the computers on the open or black market. Unlike conventional laundering practices, in which criminals sacrifice a portion of their earnings, trade-based money laundering enables criminals to recoup all their expenses by selling the merchandise. In some cases, they even turn a profit.

Trade-based money laundering has grown as global trade, including online commerce, has increased. It provides criminal organizations a relatively low-risk way to wash their funds. Countering this kind of activity requires a lot of coordination, funding and attention from authorities, who simply are unable to interdict in every instance of money laundering. Such challenges ensure that international trade-based money laundering will continue to grow.

Money Laundering in Mexico: The Struggle to Track Illicit Gains

Another preferred method of money laundering is the black market peso exchange. Mexican and Colombian criminal groups have long used this method because it is very difficult to detect and prosecute.

In these exchanges, Mexican criminals will smuggle drugs or other goods into the United States and sell them on the street for U.S. dollars. They then sell those dollars to a peso broker, who has connections in Colombia. The peso broker deposits the cash into the U.S. banking system in the form of structured deposits, making sure that these deposits do not exceed $10,000 -- the amount at which banks are required to file suspicious transaction reports to the U.S. government.

To avoid detection, the peso broker finds a Colombian importer that needs U.S. dollars and can purchase goods from U.S. exporters. The peso broker then uses funds from his U.S. bank account to pay the U.S. exporter on behalf of the Colombian importer. The U.S. exporter ships the goods to Colombia, where the Colombian importer sells the goods for pesos. These pesos are used to repay the peso broker. According to the U.S. Treasury Department, black market peso exchange moves an estimated $5 billion in drug proceeds from the United States to Colombia every year. Allaying Investor Concerns

Mexico's new money laundering law is designed to counteract these and other methods. First introduced in 2010 by then-President Felipe Calderon, the law is meant to fight organized crime and corrupt business practices in part by limiting large cash transactions for expensive commodities, such as luxury cars, airplanes and real estate.

But because of the amount of money at stake and the corruption inside the Mexican government, pushback was inevitable. And given that so many small businesses in Mexico transact solely in cash, many Mexicans believed the law would hamper economic growth. Lawmakers debated and revised the law before it eventually went to Calderon for approval in October 2012.

Pena Nieto took office in December 2012 on a platform of solving Mexico's labor, education and banking problems. He hoped to divert attention from his country's troubled security situation by showcasing its economic potential. His administration has emphasized the country's economic vitality and has sought to safeguard existing and potential investors from corruption and organized crime. If administered properly, the new law may allay investors' concerns about conducting business in Mexico.

Specifically, the law is designed to reorganize public institutions within the Ministry of Finance, which ultimately will enforce the law, and develop an intelligence system to better identify and track potential and existing money launderers. It will also establish a Special Unit for Financial Analysis attached to the Attorney General's Office.

In addition to restricting the use of cash for high-end purchases, the law also will make it more difficult for criminals to transfer large amounts of cash. It will require Mexican businesses such as banks, money-remittance services, construction companies, lottery distributors, real estate firms and automobile manufacturers and dealers to better monitor suspicious transactions, often referred to as vulnerable activities.

All these organizations will be required to submit monthly reports of suspicious transactions to the Finance Ministry, but what qualifies as "suspicious" varies from business to business. For real estate transactions, the threshold is 8,025 times the minimum wage in Mexico City (roughly $40,000). For car, boat or airplane transactions, the threshold is 3,210 times the minimum wage in Mexico City (roughly $16,000). Credit issuers, financial institutions and individuals and businesses processing credit card transactions will be required to submit a report when a credit card user has spent equal to or more than 1,285 times the minimum wage in Mexico City (roughly $6,400).

According to a provision of the law, these reports must include the contact information of the individuals involved, an explanation of their business relationships, the goods or services provided in the transaction and the origin of the funds. Commonly known as the "know your customer" process, this provision refers to the due diligence that financial institutions and other regulated companies typically conduct to prevent identity theft, financial fraud, money laundering and terrorist financing. If nothing derails the law before 2014, most Mexican businesses will be required to participate in this process.

At the heart of the new law lies the need to stem the flow of laundered U.S. dollars into the Mexican economy. According to the U.S. State Department's 2012 Money Laundering Report, Mexican criminal organizations send between $19 billion and $39 billion to Mexico annually from the United States. These remittances are driven in large part by the proximity of the United States and its relatively robust economy.

The new law may indeed disrupt illegal financial operations in Mexico. But ultimately, its effectiveness will depend partly on the vigilance of Mexican businesses and financial firms, and criminals certainly will try to exploit those that do not enforce the rules strictly. In the meantime, Mexican criminal groups will continue to use reliable money laundering techniques as they search for new methods and new countries with which to partner. The U.S.-Mexican conduit will remain intact for the foreseeable future, but Mexican money launderers have already established ties with criminal enterprises in other countries -- notably in Europe and Central and South America. After March 2014, those connections could become even stronger.

Los Zetas appears to have left a message for rival gang Caballeros Templarios, or Knights Templar, in the form of vandalism of a temple in Michoacan state, Mexico. (Associated Press)

A Mexican drug cartel known for kidnapping random civilians and beheading its rivals has expanded its operations into the U.S. The gang known as Los Zetas is recruiting U.S. prison and street gangs, and non-Mexicans, for its drug trafficking and support operations in Mexico and the U.S. An FBI intelligence bulletin notes that “multiple sources” reported the shift in Los Zetas recruiting. The cartel sought to maintain a highly disciplined and structured hierarchy by recruiting members with specialized training, such as former military and law enforcement officers.

“The FBI judges with high confidence that Los Zetas will continue to increase its recruitment efforts and establish pacts with non-military trained, nontraditional associates to maintain their drug-trafficking and support operations, which may increase violence along the Southwest border posing a threat to U.S. national security,” the bulletin says.

The expansion of Los Zetas operations across the southwestern border has long been a concern of U.S. authorities. Trained as an elite band of Mexican anti-drug commandos, Los Zetas evolved into mercenaries for the infamous Gulf Cartel, unleashing a wave of brutality in Mexico’s drug wars.

Bolstered by an influx of assassins, bandits, thieves and thugs, as well as corrupt federal, state and local police officers, the gang has evolved into a well-financed and heavily armed drug-smuggling force of its own.

Known for mounting the severed heads of its rivals on poles or hanging their dismembered bodies from bridges in cities throughout Mexico, Los Zetas easily has become the most feared criminal gang in Mexico.

“The Zetas are determined to gain the reputation of being the most sadistic, cruel and beastly organization that ever existed,” said George W. Grayson, a professor of government at the College of William & Mary and a specialist on Mexican drug gangs. “Many of Mexico’s existing drug cartels will kill their enemies, but not go out of their way to do it. The Zetas look forward to inflicting fear on their targets. They won’t just cut off your ear; they’ll cut off your head and think nothing of it.”

Weapons, cars, horses

The FBI intelligence bulletin quotes what it describes as “corroborated collaborative” sources “with excellent access” to show that Los Zetas has increased its effort to recruit and contract with U.S. gangs for daily drug trafficking activities in the United States.

The bulletin says the FBI had “moderate confidence” that Los Zetas likely will pose a higher national security threat to the U.S., based on “demonstrated capabilities for violence, their recent killings of U.S. citizens, increased kidnappings of U.S. citizens on both sides of the border, and their continued participation in the U.S. drug trade.”

According to the FBI, Los Zetas:

• Made contact with the Texas Mexican Mafia prison gang and tasked its members to collect debts, carry out hits and traffic drugs into and through Laredo, Texas.

• Tried to recruit U.S. gang members in Houston to join Los Zetas’ war against the Gulf Cartel on both sides of the border.

Editor's Note: This Security Weekly assesses the most significant cartel-related developments of the second quarter of 2013 and provides updated profiles of Mexico's powerful criminal cartels, as well as a forecast for the rest of this year. It's the executive summary of a more detailed report available to clients of our Mexico Security Monitor service.

By Tristan Reed Mexico Security Analyst

Mexican authorities arrested Los Zetas' top leader, Miguel "Z-40" Trevino Morales, roughly 27 kilometers (17 miles) southwest of Nuevo Laredo, Tamaulipas state, on July 15. Trevino's is the most significant capture in Mexico's drug war in recent years. The fate of Los Zetas and the response of Los Zetas' rivals has accordingly become uncertain moving into the third quarter. Indicators will emerge during the third quarter providing clarity on what to expect for security and cartel operations throughout Mexico.

Beyond the Trevino arrest, the second quarter also saw continued expansion of community-organized militias, commonly referred to as self-defense groups or community police, a trend we identified in the 2013 first quarter update. In Michoacan state, militia activity was so pronounced that Mexico City deployed the military and federal police to reassert government authority. The proliferation of these groups increasingly affects not just the Mexican government's strategy for combatting crime and violence, but also the strategies of Mexico's transnational criminal organizations.Los Zetas

It is too early to gauge the extent to which Trevino's arrest will impact Los Zetas' operations. Whether a Los Zetas member is capable of filling the leadership vacuum will determine the impact. In the meantime, each of Los Zetas' rivals will likely revise their current strategies in fighting Los Zetas depending on their respective geographic reach and perceptions of Los Zetas' moment of weakness in the wake of the loss of their leader.

One reason behind Los Zetas' success has been the group's ability to replace its leadership, even its most senior leaders, relatively easily. Trevino himself succeeded former leader Heriberto "El Lazca" Lazcano Lazcano sometime during 2012 -- albeit prior to Lazcano's death during a military operation in October 2012 -- without any noticeable internal strife, a rare occurrence among Mexican criminal groups.

This ability stems from founders' military pedigree. Because ex-military personnel formed Los Zetas, members tend to move up in the group's hierarchy based on merit rather than familial connections. Unlike his predecessor, Trevino did not have a military background, so it is possible that the group's culture has changed somewhat, dulling its facility for smooth leadership transitions.

It is unclear who will try to keep the group together. Trevino's brother, Omar "Z-42" Trevino, will likely continue to maintain his role in criminal operations. His position was significantly boosted by his brother's ascent to the top spot, but it remains to be seen whether he has the capability or respect within the organization to replace his brother.

Violence will likely follow Trevino's capture in some parts of Mexico. The location and the scale of that violence depends on how resilient Los Zetas and its component cells are as rivals move to capitalize on what they see as a moment weakness.

Another potential impact of the arrest of Trevino will fall on Los Zetas' national strategy. The group has boasted cohesive network spanning more than half of Mexico, from which it has planned assaults on the territories of rivals such as the Sinaloa Federation. This was on display in Sinaloa state via a strategy that depended on coordination with the remnants of the Beltran Leyva Organization, which maintain a substantial presence in Sinaloa, and on Los Zetas' ability to stage gunmen and operations outside Sinaloa state. If Los Zetas cannot maintain the same level of cohesion as a whole, such strategies may dissolve.

In the third quarter, several indicators will reveal the impact Trevino's has on Mexican security and on Los Zetas' continued viability. These include shifts in violence within Zetas territories such as Tamaulipas, Nuevo Leon, Zacatecas, San Luis Potosi, Coahuila, Veracruz, Hidalgo and Tabasco states. Another indicator likely to emerge during the third quarter will be information operations campaigns by Los Zetas' rivals. While cartel propaganda, most commonly seen in narcomantas, is often disinformation, the messages' topics often demonstrate the priorities of the cartel behind the narcomanta.'Community Police'

Vigilantism and non-government militias have long been seen throughout Mexico. The phenomenon of community police goes back at least to 1995, by which time an institutionalized collective of militias, the Regional Coordinator of Community Authorities, had a well established presence in parts of Guerrero state. Self-defense groups began to expand into communities throughout Guerrero and Michoacan states in early 2013, a year that has seen the role of community police in Mexico's domestic security issues expand rapidly.

In Michoacan, the militias appear to form within the confines of distinct communities. The groups remain largely disconnected, though they share the goal of confronting organized crime organizations and, at times, of countering government interests. In Guerrero, the presence of self-defense groups is much greater given their longer history there and given that state laws grant special recognition to them, particularly to those in indigenous communities.

Two separate and sometimes conflicting bodies coordinate self-defense group operations in Guerrero state: the Union of People and Organizations of Guerrero state and the Regional Coordinator of Community Authority. These groups, which call themselves community police, follow their own procedures for administering justice in their areas of operations and engage in talks with the state government. Regardless of the institutional system, both groups have been actively expanding their reach in Guerrero state through promoting the establishment of community police in new locales. This expansion has brought intermittent moments of tension with the state and federal governments due to the demonstrations and roadblocks that have accompanied it, as well as because of the increasing interactions between community police and organized crime during the second quarter of 2013.

As the Regional Coordinator of Community Authority and the Union of People and Organizations of Guerrero state community police have historically operated with limited funding, their members have largely served as volunteers armed primarily with hunting rifles and shotguns.

By contrast, the recently formed self-defense groups in Michoacan reportedly are equipped with assault rifles, tactical gear and sport utility vehicles. Self-defense groups in Michoacan also have targeted organized criminal groups -- specifically the Knights Templar, which apparently has inflicted the most harm on the people of Michoacan -- much more actively. Groups in the Buenavista Tomatlan, Tepalcatepec and Coalcoman municipalities of Michoacan state were founded during the first and second quarters of 2013 to confront the Knights Templar, which have dominated regional criminal activity since its split from La Familia Michoacana in 2010. In response, the Knights Templar disseminated propaganda denouncing Michoacan's self-defense groups and has violently attacked them. This forced the Mexican government to deploy federal security forces, including Federal Police and the military, in May to quell the rising violence and reassert government authority in the affected communities. The troops are currently maintaining an increased operational tempo in Michoacan state and likely will continue to do so through the next quarter.

Community police groups reflect the social consequences of prolonged violence and Mexico City's inability to enforce the rule of law in rural regions that historically are difficult to govern. In most cases, residents in communities with active self-defense groups rely primarily on those groups to maintain public order, undermining Mexican government authority. This has lead to tensions between the communities and government authorities. Sometimes, these tensions spark demonstrations and even low-level violence, occasionally blocking important transportation routes along southwest coastal highways and interior roads throughout Michoacan and Guerrero states. Such blockades can last several days, with the self-defense groups ultimately winding up in negotiations with federal troops and multiple levels of government.

The expansion of self-defense groups also has led to increased conflict between them and Mexican cartels, particularly the Cartel de Jalisco Nueva Generacion and the Knights Templar. Michoacan's self-defense groups emerged amid a turf war between these two cartels. Notably, the self-defense groups have formed along roads connecting Jalisco and Michoacan. These are the same roads through which the Cartel de Jalisco Nueva Generacion and Knights Templar stage incursions into one another's territories. Thus the self-defense groups have not only directly impacted Knights Templar's operations but also inadvertently aided the efforts of the Cartel de Jalisco Nueva Generacion in its incursions into Michoacan state.

Self-defense groups would not be in a position to confront organized criminal groups without some level of financial and other material support. While self-defense groups in Guerrero have in the past operated on a modest budget with the help of the community and occasional support from the government, the possibility remains that they have new benefactors -- perhaps including organized criminal groups. In June, business leaders in Chilpancingo, Guerrero state, met with Union of People and Organizations of Guerrero state representatives in an attempt to strike a deal to jointly combat extortion, an increasing problem as violence worsens. Such agreements do not yet appear to include financial support, something that could elevate the tactical capabilities -- and further the geographic expansion -- of the Union of People and Organizations of Guerrero.

Despite a stated intent to combat organized crime, self-defense groups could collude with organized criminal groups. Mexican military officers have made multiple accusations that self-defense groups in Michoacan state and self-defense groups emerging in July in the Costa Grande region of Guerrero state (unaffiliated with either the Regional Coordinator of Community Authority or the Union of People and Organizations of Guerrero state) are linked to organized crime. Likewise, the Knights Templar has actively spread propaganda through narcomantas and online media alleging that their principal rival, the Cartel de Jalisco Nueva Generacion, is behind the expansion of self-defense groups. There have been no further reports of links between self-defense groups and organized crime, and Mexican authorities apparently have not followed up on such accusations.

As exemplified by the May deployment of federal troops to Michoacan, self-defense groups have added additional complexity to Mexico's security environment, forcing the federal government to adjust its strategy. The Mexican government wishes to contain the expansion of self-defense groups, since they pose a threat to governmental authority. Thus far, the current government strategy has been to substantially increase military and law enforcement presence in exchange for self-defense groups' limiting their activity. This strategy will only yield temporary results, however, until the violence carried out by organized crime groups can be stamped out.

Specifically in Michoacan and Guerrero states, self-defense groups will likely continue to expand into some rural communities during the third quarter. As a result of continued expansion, confrontations between self-defense groups and organized crime could increase. Should violence with organized crime continue to escalate or tension between self-defense groups and the Mexican government rise as result of the groups' continued expansion, additional federal troop deployments to either Michoacan or Guerrero states could occur during the third quarter.

In addition to consequences resulting from their expansion, self-defense groups will continue to impact the conflict between the Cartel de Jalisco Nueva Generacion and the Knights Templar in Jalisco, Michoacan and Guerrero states. Since the fourth quarter of 2012, this conflict has become more active, with the groups mounting continued incursions into their rivals' strongholds in Jalisco and Michoacan states and violence occurring in Guerrero state. To more effectively combat the Cartel de Jalisco Nueva Generacion, the Knights Templar aligned with a Gulf Cartel faction and Los Coroneles (a organized crime group derived from now-deceased Ignacio "Nacho" Coronel Villareal's network) to form Los Aliados. Thus far, Los Aliados have had little impact on the Cartel de Jalisco Nueva Generacion's hold over Jalisco. Due in part to the contest between self-defense groups and the Knights Templar in Michoacan state, the Cartel de Jalisco Nueva Generacion has made inroads into Michoacan state, particularly in towns along highways linking Michoacan and Jalisco. The conflict between the two criminal organizations has increased violence, particularly in Jalisco and Michoacan states but also in Guerrero state.

MEXICO CITY — A drug kingpin convicted of masterminding the murder of an American drug agent in 1985 — a killing that helped accelerate the modern drug war and that remains an emotional touchstone for law enforcement agents — was unexpectedly released from prison on Friday after his conviction was overturned.Enlarge This ImageAgence France-Presse — Getty Images

Rafael Caro Quintero, shown in 2005, had served 28 years in prison.

The decision caught the American authorities by surprise. A Mexican federal judge freed the drug lord, Rafael Caro Quintero, after ruling that he had been improperly tried in federal court rather than state court for the murder of Enrique Camarena, known as Kiki, a Drug Enforcement Administration agent who was abducted, tortured and killed.

Mr. Caro Quintero, a pioneer in mass producing and distributing marijuana and transporting South American cocaine, had 12 years left on his 40-year sentence. He was notified of his release at 2 a.m. Friday and promptly disappeared sometime after.

It was among the head-scratching developments in a case that could inject new tension between American and Mexican authorities, who are still working out how to cooperate under a new Mexican president wary of deep American involvement in Mexican drug cases.

The Drug Enforcement Administration “is deeply troubled” and “will vigorously continue its efforts to ensure Caro-Quintero faces charges in the United States for the crimes he committed,” the agency said in a statement, though it was unclear if an extradition request was pending.

The Justice Department filed conspiracy and racketeering charges against Mr. Caro Quintero in May 1987 related to the killing, and “in the years since, the Department of Justice has continued to make clear to Mexican authorities the continued interest of the United States in securing Caro Quintero’s extradition so that he might face justice in the United States,” it said in a statement.

Current and former drug agents recall the death of Mr. Camarena, which galvanized antidrug campaigns, as if it had occurred yesterday. The D.E.A. office in San Diego is named after Mr. Camarena, as is a school there and a conference room in the American Embassy in Mexico City. The story was the subject of a popular 1990 television mini-series, “Drug Wars: The Camarena Story,” starring Benicio Del Toro. Red Ribbon Week, a popular drug prevention campaign, originated as a commemoration of him.

“At no time should Rafael Caro Quintero see the light of day as a free man,” said Joel Gutensohn, a former D.E.A. agent and president of the Association of Former Federal Narcotics Agents. “We find it astounding that after 28 years his guilt should still be at issue. The release of this violent butcher is but another example of how good-faith efforts by the U.S. to work with the Mexican government can be frustrated by those powerful dark forces that work in the shadows of the Mexican ‘justice’ system.”

Although Mr. Caro Quintero had other charges pending, the judge ruled that his 28 years in prison would count toward any sentence for those charges.

The release followed a series of other such cases, as Mexican courts strive to enforce due process more strictly in a country where forced confessions, torture and prolonged detention on trumped-up charges are common.

But Mr. Camarena’s case has long stood out on both sides of the border as a rare, deliberate murder of an American drug agent on foreign soil that shifted the ground in the drug war and for a time plunged United States-Mexico relations to a low. In the aftermath, Mexico and the United States agreed to work more closely on drug enforcement, ultimately increasing cooperation to unprecedented levels under the previous Mexican president.

After the murder, the United States was determined to find the killers, accusing Mexican officials of botching the case and going as far as to pay bounty hunters in Mexico to abduct a doctor believed to have been involved in Mr. Camarena’s torture. He was later absolved of the crime and returned to Mexico, though several others associated with the case were convicted in the United States on drug and other charges.

Mr. Caro Quintero, head of a drug-trafficking empire based in Jalisco State, where Mr. Camarena worked and had uncovered a large marijuana plantation, was believed to have ordered the killing. He fled to Costa Rica but was detained there, returned to Mexico in 1985, and convicted and sentenced in 1989.

The governor of Jalisco State, Aristóteles Sandoval, said Friday that Mr. Caro Quintero had the right to resume his life there, like any citizen.

Mexican President Enrique Pena Nieto is expected to submit his party's landmark proposal for energy reform to Mexico's Congress in the coming week, culminating nearly a year of speculation and intrigue. Despite the controversy over the reforms, which proved troublesome for many previous administrations, Pena Nieto and the Institutional Revolutionary Party will enact measures capable of revolutionizing Mexico's energy sector. Unlike previous attempts, this energy reform package has the support of Mexico's largest opposition group, the National Action Party. The second-largest opposition group, the Democratic Revolutionary Party, is too weak to seriously hinder the bill's passage. While lawmakers will debate the finer points of the reforms, as well as any subsequent pieces of legislation, Mexico will soon see the most transformative adjustment to its energy sector in more than half a century -- even as it sees some public unrest in response to the bill.Analysis

In December 2012, Mexico's three major parties agreed in the Pact for Mexico to reform the energy sector. But the promise was intentionally vague, leaving ample space for tri-partisan cooperation. Now, eight months later, Mexico's ruling party is poised to announce its proposal for reforming the country's struggling energy sector.

On one end of the spectrum, the leftist Democratic Revolutionary Party supports the most limited energy reform, focusing solely on improving Petroleos Mexicanos, commonly known as Pemex, from within. It does not advocate changing the constitution's Article 27, which prohibits concessions in the energy sector. This kind of reform would make the company more profitable but would not address the country's most pressing issue: the need to expand hydrocarbon exploration and production from the comparatively easy and inexpensive Bay of Campeche into the more difficult, more capital-intensive deep-water plays in the Gulf of Mexico and in the shale deposits in the northeastern basins.

Mexico's Main Oil and Natural Gas Regions

On the other end of the spectrum, the right-of-center National Action Party previously has supported more comprehensive proposals, including the idea of partially privatizing Pemex. Given the nationalist fervor surrounding Mexico's oil -- a fervor whose roots can be found in the post-Mexican Revolution period -- this proposal is highly controversial and stands little chance of acceptance. While there is a broad consensus on the need to allow more private partnerships and promote competition, a consensus has yet to be reached on privatizing Pemex or on allowing private firms to own the oil itself.

In the middle of these two extremes lies the proposal the ruling party is likely to put forth. The Institutional Revolutionary Party has suggested numerous times that it is interested in a transformative, structural reform, but one that stops short of privatizing Pemex. This is widely understood to mean improving Pemex operationally, introducing more attractive contracting models and perhaps even breaking Pemex's and the Federal Electricity Commission's monopolies. How the ruling party will go about doing this is still unknown. In theory it could implement tax reform, pension reform or subsidy reform. Otherwise it could require Pemex to have a certain stake in any offshore project, or it could give Pemex certain lucrative areas for exploration. But essentially, this middle-ground proposal allows the country to address declining hydrocarbon production without ceding control over its most lucrative natural resource and associated state-owned enterprise.Obstacles to Reform

Pushing through the desired reforms likely will require a constitutional amendment -- many reforms passed under the current administration have. But to amend the constitution, the Institutional Revolutionary Party would have to partner with another party to secure the two-thirds majority in the federal legislature and a simple majority of all state legislatures. The National Action Party is the most logical choice because it has been trying for 12 years to reform the energy sector. Its proposal is transformative, while the Democratic Revolutionary Party's ideas are essentially more of the same.

In late July, the National Action Party proposed a reform that would change articles 25, 27 and 28 of the constitution. In Article 25, the party introduces environmentally friendly qualifiers, likely to curry favor with Mexico's Green Party and satisfy the Pact for Mexico promise to make Pemex a central force in the fight against climate change. In Article 27, it proposes scrapping the prohibition of concessions, thereby creating the opportunity for increased foreign investment. In Article 28, it proposes breaking the monopolies in the energy and electricity sectors, thus allowing private firms to compete all along the production chain: exploration and production, distribution, refining and retail. This would relieve some of the burden on Pemex to operate certain sections of the supply chain at a loss and enable the firm to focus on its more profitable activities in the upstream sections.

The proposal also calls for the creation of a Mexican Petroleum Fund to manage petroleum proceeds. Moreover, it would allow the National Hydrocarbon Commission and the Energy Regulatory Commission to grant concessions to the private sector in the upstream and the downstream/electricity sectors, respectively. The National Action Party also proposes keeping Pemex and the Federal Electricity Commission as state-owned companies but removing them from the federal budget and granting them operational autonomy, as well as a 10-year plan to reduce the federal government's dependence on Pemex for tax revenues. This ensures a soft landing and gives the government time to develop other sources of fiscal revenue.

None of this directly contradicts the broad outline of what the ruling party is expected to propose. It addresses the need to make Pemex more efficient, and it grants the government the ability to form new contracting models -- effectively breaking Pemex's and the Federal Electricity Commission's monopolies. There is no privatization of Pemex, and there is nothing to suggest that the oil will cease being the property of the Mexican nation. Details are still scarce, but recent reports suggest that the government will find a way to give foreign firms the juridical certainty and the profit margins needed to incentivize risky, capital-intensive endeavors without transferring ownership of the resource itself. So while the Institutional Revolutionary Party's proposal will differ from the National Action Party's, those differences likely will be surmountable.Growing Support for Pena Nieto's Plan

Pena Nieto has used the past eight months to consolidate support for the reform from within his party. In the last week of July, the Mexican government came to a wage increase agreement with the powerful oil workers union and had talks with some 18 Institutional Revolutionary Party governors whose support will be critical for passage of the constitutional reform. Unlike the National Action Party before it, the Institutional Revolutionary Party has been bringing all of the major interest groups on board before releasing the proposal, suggesting that once it is released it will be debated and approved relatively quickly, possibly by year's end. Recent delays in releasing the proposal suggest the government is addressing disagreements pre-emptively rather than waiting until later on to address internal concerns.

With few major disagreements between the National Action Party and the ruling party on the proposal, and with the major pillars of the ruling party apparently in favor of the reforms, Pena Nieto's efforts now are more of a public relations campaign than anything else. The opposition Democratic Revolutionary Party is trying to characterize the reform as a brazen and undemocratic privatization. By contrast, the Institutional Revolutionary Party has vociferously denied that the reforms will privatize Pemex and change the ownership status of the country's oil reserves.

Privatization is a highly ambiguous term in the context of Mexico's energy sector reforms. The Democratic Revolutionary Party equates privatization to allowing foreign and private firms to gain concessions, and the other two major parties equate privatization to allowing private investment in Pemex. Ultimately, the task for the Mexican government is to forge a proposal that significantly addresses problems facing the energy sector while convincingly arguing that the reform is not tantamount to privatization.

The Democratic Revolutionary Party has announced that it will hold a non-binding national referendum in half of Mexico's states on Aug. 25 and in the other half on Sept. 1. (The referendum coincides with the start of Congress's regular session.) The party also has planned a national demonstration on Sept. 8. These measures portend a fractious September, though the Democratic Revolutionary Party's ability to impede the passage of the bill is doubtful. Andres Manuel Lopez Obrador, a former presidential candidate for the party, managed to bring some 30,000 people out to protest an energy reform in 2008, but the Democratic Revolutionary Party's popularity has since waned, as has the popularity of Lopez Obrador, who has left his former party.

The Democratic Revolutionary Party can protest the bill but only at the risk of appearing obstructionist. In the meantime, the Institutional Revolutionary Party and National Action Party will go on to pass one of Mexico's most transformative reforms in decades.

MEXICO CITY—At a time when politicians in Washington struggle to agree on anything, their Mexican counterparts—who spent the past dozen years locked in bruising battles—sit down almost daily to talk about thorny issues.

Sometimes they tip a glass. Sometimes they share a pizza. And, increasingly, they reach agreements.

In the past eight months, Mexico's Congress has passed a constitutional change to curb the powerful public teachers union; a legal reform to strip public officials of immunity from criminal prosecution; and a telecommunications bill that sharply limits the quasi-monopolistic powers of the country's biggest telephone company, controlled by billionaire Carlos Slim.

In interviews with The Wall Street Journal, top officials from Mexico’s three major political parties discussed the impact of a wide-reaching agreement that has paved the way for key reforms.

This week, President Enrique Peña Nieto delivered a proposal to crack open Mexico's historically closed state-owned energy market to private companies. All three parties also began discussing the creation of a national election agency that oversees all federal, state and local elections—a key demand of the opposition.

The steady stream of deal-making, after years of partisan gridlock, is causing ordinary Mexicans to take notice and reviving international confidence in the country's economy even as interest in other big emerging markets flags. During the past 12 months, Mexico's stock index rose 5% and the peso strengthened 3.5% against the dollar, even while Brazil's leading stock market index fell 13% and its currency sank 14%.

Political leaders met last November to negotiate a pact to pave the way for major reforms. Attendees included representatives of Enrique Peña Nieto and top officials from the PAN and PRD parties.

In the coming months, Mr. Peña Nieto and the three parties plan to tackle a tax reform to boost revenues and reduce heavy reliance on income from oil exports, and end the constitution's ban on lawmakers serving consecutive terms. "I spend around 60% of my time with members of the opposition, discussing bills," says Aurelio Nuño, chief of staff to Mr. Peña Nieto. "We've all gotten to know each other very well. You come to see each other as people, not just politicians."

As he talks, the phone rings. It is the president, asking how the day's meetings with the opposition went. "He calls after every meeting," Mr. Nuño says.

Behind the change is a wide-ranging political agreement called the Pacto por México, or Pact for Mexico. Unveiled with little fanfare the day after Mr. Peña Nieto took office in December, the deal was signed by the all three major political parties, the ruling Institutional Revolutionary Party (PRI), the leftist Party of the Democratic Revolution (PRD) and the conservative National Action Party (PAN).

The pact outlines 95 goals ranging from the tax overhaul to barring junk food in schools. The hope is to get all done before the politics of midterm elections in 2015 make deal-making more difficult.

"What we're seeing so far is a kind of legislative coalition, something remarkable in Mexico," said political analyst José Antonio Crespo at Mexico City's CIDE graduate school and research institute.

Many investors view the future of Mexico's economy as linked to the success of the pact. "Investors care a lot about the pact. You can't imagine how many questions I get about it," said Gray Newman, chief economist for Latin America at Morgan Stanley.

Obstructionist politics were the norm here over a bitter 15-year stretch beginning in 1997, when the country became a full democracy and the PRI, which had governed since 1929, lost control of Congress for the first time. Few major initiatives passed both houses, which were divided between the three big political parties, none holding a majority.

The bickering got so bad that the losing candidate in the 2006 presidential election, nationalist leader Andrés Manuel López Obrador, refused to acknowledge then President Felipe Calderón as president. Mr. López Obrador led months of street protests and declared himself the "legitimate president."

Bickering is bound to resurface. The pact's most crucial test comes as the parties sit down to discuss opening the oil industry, whose protected status has long been a point of national pride.

The chances of getting the initiative approved appear high. The opposition PAN party says it will back the proposal, giving the ruling PRI the two-thirds majority needed to change the constitution.

The wild card is the leftist PRD. The party will almost certainly vote against the reform—even possibly take to the streets to protest it, party leaders say. But they say they won't blow up the pact if they don't get their way on a single issue.

"We're not going to abandon the negotiating table," said Guadalupe Acosta Naranjo, a high-ranking PRD official who helps represent the party in pact negotiations. "We can protest in the streets against the energy reform, and at the same time talk with the government over tax reform."

While the political stalemate in Washington has become most pronounced in recent years, Mexico's politics were stuck long enough for the country to drift dangerously. Indeed, a big reason why the pact happened is that all three parties grew alarmed about how weak the Mexican state had grown.

For centuries, this land was ruled with an iron fist—from Aztec emperors to Spanish colonial viceroys to a succession of powerful presidents. That ended with the rise of democracy in the 1990s. The president was forced to cede power to institutions like Congress and the courts that had atrophied under centralized rule.

The result: a power vacuum filled by other forces, including drug gangs that killed an estimated 70,000 people in the past seven years and seized control of parts of the country. Some state governors, left unchecked, ruled their states like feudal lords, building up vast fortunes. Union leaders became enormously powerful.

Big business operated unfettered. Government attempts to regulate the country's monopolies and introduce competition in sectors from telecommunications to beer went nowhere.

"While politicians quarreled during these last 15 years, the space that the state's democratic authority left empty was occupied by private interest groups, be they monopolist firms, drug traffickers or the unions," said Jesús Zambrano, the president of the PRD.

While the parties have very different ideologies, they found common ground. All three parties, for instance, found that they shared a frustration that Mr. Slim's telephone companies charged ordinary Mexicans far higher rates than in comparable countries, and got around regulation by tying up rulings in the country's Byzantine courts. So the political parties agreed to create a new telecom regulator with powers to break up monopolies and whose decisions cannot be suspended in court until the appeals process ends.

Another factor behind the deal-making was the departure from the PRD of Mr. López Obrador, who left to form his own party last September. That gave the party a unique chance to rebrand itself as a moderate, open-minded left-wing group.

PRD moderates broached the idea for the pact, inspired by a landmark deal in Spain in 1977 that helped transform the country after the decadeslong Franco dictatorship.

It all began a year ago, around a month after the July presidential election, when PRD president Mr. Zambrano and his right-hand man, Jesús Ortega, held a secret meeting at the Mexico City house of José Murat, a senior PRI politician with friends across party lines. At the meeting was Mr. Peña Nieto's top adviser, Luis Videgaray, the current finance minister. He took the idea of a broad-ranging pact to the president-elect.

"Why not? What do we lose?" Mr. Peña Nieto responded, according to two people who talked to him on those days. For the president, the pact could broaden his popularity beyond his 38% vote share and get Mexico's economy moving again.

At the same time, the president-elect's team began holding private meetings with leaders of the PAN, which governed Mexico from 2000 to 2012.

"We didn't want revenge," said Gustavo Madero, the president of the PAN. When in power, the PAN felt constantly thwarted by the PRI.

By mid-September, a group of nine people from all three parties secretly started working on a draft at the house of Mr. Murat, the PRI politician.

The group laid some early ground rules. "First, we agreed negotiations must always remain private. Second, nothing is agreed until all is agreed. And third, negotiations shouldn't be affected by current events," said Santiago Creel, a former PAN interior minister who participated in the talks.

The group of nine politicians would agree on broad principles, and then a group of only three members—one from each side—would break off to hammer out the specific language of the pact.

An atmosphere of mistrust at the outset gave way to familiarity and even friendship. Some nights ended with leaders sharing improvised dinners of tacos or pizza.

"The key was to give the benefit of doubt to the adversary," said Mr. Ortega. "Not to be dogmatic and avoid as much as possible an ideological approach."

By late November, a 34-page draft was nearly ready. On a feverish last night of negotiations following the president's inauguration on Dec. 1, parties finally agreed on the wording of the proposed energy reform. At 2 a.m., Mr. Murat broke open a bottle of Johnnie Walker Blue Label and poured everyone a glass. They raised their glasses and offered each other a toast: "To Mexico."

Mexico’s plague of police corruptionDespite millions in U.S. aid, forces continue to be outgunned, overwhelmed — and often purchased outright — by gangsters

DUDLEY ALTHAUS, HOUSTON CHRONICLE | October 18, 2010

Federal police officers stand in formation in June while drug-dealing suspects are presented to the media in Mexico City. The officers' faces are covered to protect their identities. Photo: Eduardo Verdugo, Associated Press

MEXICO CITY — City cops killing their own mayors; state jailers helping inmates escape; federal agents mutinying against corrupt commanders; outgunned officers cut down in ambushes or assassinated because they work for gangster rivals.

Six prison guards were killed Wednesday as they left their night shift in Chihuahua City, 200 miles south of El Paso. On Tuesday, the head of a police commander supposedly investigating the death of an American on the Texas border was packed into a suitcase and sent to a local army base.

Mexicans justifiably have long considered their police suspect. But today many of those wearing the badge are even more brazenly bad: either unwilling or unable to squelch the lawless terror that's claimed nearly 30,000 lives in less than four years.

State and local forces, which employ 90 percent of Mexico's 430,000 officers, find themselves outgunned, overwhelmed and often purchased outright by gangsters.

Despite some dramatic improvements — aided by U.S. dollars and training under the $1.6 billion Merida Initiative — Mexico's 32,000 federal police remain spread thin and hobbled by graft. And many in Mexico consider the American investment little help so far against the bloody tide wrought by drug gangs.

Grasping for a cure, President Felipe Calderon and other officials are pushing to unify Mexico's nearly 2,000 municipal police under 32 state agencies that they insist can better withstand the criminals' volleys of bullets and cash.

"The tentacles of organized crime have touched everyone," said Ignacio Manjarrez, who oversees public security issues for a powerful business association in Chihuahua, the state bordering West Texas that has become Mexico's most violent. "There are some who are loyal to their uniform and others who will take money from anyone and everyone.

"We let it into our society. Now we are paying the consequences."

Many actions, few results

Across Mexico, local, state and federal police forces have been purged, then purged again. Veteran officers and recruits alike undergo polygraphs, drug tests and background checks. A national database has been set up to ensure that those flushed from one force don't resurface in another.

Still the plague persists.

One of the surest signals that rivals are going to war over a community or smuggling routes are the dumped corpses of cops who start turning up dead. Many, if not most, of the officers are targeted because they work for one gang or the other.

Scores of federal officers rebelled this summer, accusing their commanders of extortion in Ciudad Juarez, the murderous border city that Calderon pledged to pacify. As a result, Mexican officials fired a tenth of the federal police force.

The warden and some guards at a Durango state prison were arrested in July after a policeman confessed in a taped gangland interrogation that they aided an imprisoned crime boss's nightly release so he could kill his enemies.

Another prison warden and scores of guards were detained in August following the breakout of 85 gangsters in Reynosa, on the Rio Grande near McAllen.

On Friday, the governor of Tamaulipas state, which borders South Texas, ordered the purging of the police force in the important port city of Tampico. Gov. Eugenio Hernandez said he took the action following officers' apparent participation in this week's brief abduction of five university students in the city.

$100 million a month

Mexico's top federal policeman, Genaro Garcia Luna, has estimated gangsters pass out some $100 million each month to local and state cops on the take.

"There really is no internal capacity or appetite to try to get their arms around corruption," said a former U.S. official with intimate knowledge of Mexico's security forces. "Anyone who sticks their head up, wanting to make a change, is eliminated."

Edelmiro Cavazos, mayor of Santiago, a picturesque Monterrey suburb, had vowed after taking office to clean up its police force, which many believe is controlled by the gangster band known as the Zetas.

He barely got the chance to try.

Killers came for him in August, arriving at his home on five trucks, a surveillance tape showing their headlights slicing the night like knives as his own police bodyguard waved them in.

A workman found Cavazos' blindfolded and bound body a few days later, tortured, shot three times and dumped like rubbish along a highway outside Santiago.

The bodyguard and six other officers from Santiago's police force are among those accused in the killing.

"They considered him an obstacle," the Nuevo Leon state attorney general said.

Following Cavazos' slaying and that of 600 others in the Monterrey area this year, Nuevo Leon Gov. Rodrigo Medina proposed bringing municipal police forces under unified state command.

"We have to act as a common front," Medina told reporters. "If we are divided in isolated forces and we have a united organized crime against us and society, we aren't going to be able to articulate the forceful response we need."

New command structure

The tiny western state of Aguascalientes created a unified police command this week. And Calderon won support for the plan Tuesday from 10 newly elected governors.

"Having institutions that enjoy the full confidence of the public can't be put off," Calderon told the new governors. "The single police command is a crucial element in achieving the peace and tranquility that Mexicans deserve."

Although small training programs for state and local forces exist, American dollars by way of the $1.6 billion Merida Initiative until now have been aimed mostly at Mexico's federal police.

Intelligence gathering and sharing has been enhanced and computer systems upgraded. U.S. and other foreign experts have given extensive training to a third of the federal force, officials say, with another 10,000 Mexican officers attending workshops.

"Beyond the money, the Merida plan put information and technology at the disposal of the Mexican government," said Manlio Fabio Beltrones, president of Mexico's senate, whose Institutional Revolutionary Party is widely favored to reclaim the presidency in 2012.

Its critics argue that the U.S. aid has failed to curtail the violence, leaving communities and local police forces at the mercy of gangsters.

Javier Aguayo y Camargo, a retired army general who was replaced as Chihuahua City's police chief this month, said no one has "figured out how to make the reforms work."

"The resources of Merida remain at the federal level," Aguayo y Carmargo said. "We haven't felt any of it. They need to support the states and municipalities."

Gangs reverse gains

Chihuahua City, capital of the state bordering West Texas, underscores just how quickly the drug wars have overpowered even the best attempts to strengthen local police.

Under a succession of mayors since the late 1990s, the city's police steadily improved. Hiring standards were raised, record keeping improved, arrest and booking processes overhauled. A citizen's oversight committee was set up with significant influence within the department.

Three years ago, the 1,100-officer force became the first in Mexico to be accredited by CALEA, a U.S.-based law enforcement association that rigorously evaluates police administrative standards. Only a handful of other Mexican cities have since won accreditation.

Then Mexico's gangland wars arrived in 2008.

The city of 800,000 has been racked this year by an average of four killings daily, according to a recent study by El Heraldo, the leading local newspaper, about 30 times more than a few years ago. It now ranks as Mexico's third most murderous city, behind Ciudad Juarez and Culiacan, capital of the gangster-infested state of Sinaloa, federal officials say.

Scores of city police officers have been fired for suspected corruption. More than two dozen others have been killed, either gunned down in street battles or assassinated by gangsters.

"If with all this equipment and training they are overwhelmed by the criminals, what happens in other places?" said Manjarrez, the businessman who monitors public security matters in Chihuahua. "As prepared as we were, we never saw this tsunami coming."

Dude... It would be wonderful if just once, someone that has actually worked here, for the Mexican government, wrote one of these things. Is there corruption? In a word, yes, but then how many go to work, doing the right thing, knowing that their own partners may kidnap, torture, and kill them and their families. Want to talk about Dorner, you go right ahead, but keep it in your country because the last I checked, none of the law enforcement up there has to go to work daily with what I just listed above. We have the best and worst of both. Try a little respect.

Logged

Do not fear going anywhere, nor doing anything. You will die where you are supposed to.

Editor's Note: This Security Weekly assesses the most significant cartel-related developments of the third quarter of 2013 and provides updated profiles of Mexico's powerful criminal cartels, as well as a forecast for the rest of this year. It is the executive summary of a more detailed report available to clients of our Mexico Security Monitor service.

Despite the high-profile arrests of Los Zetas' top leader, Miguel "Z-40" Trevino Morales, on July 15 and Gulf cartel leader Mario "El Pelon" Ramirez Trevino on Aug. 17, the third quarter much like the second quarter experienced a continuation of existing trends in organized crime. Tit-for-tat cartel conflicts continued, but Mexico's various organized criminal groups largely controlled the same territory they did at the beginning of the quarter. The third quarter did see intermittent periods of escalated violence by rival groups seeking territory. These included the Cartel de Jalisco Nueva Generacion's conflict with the Knights Templar in Michoacan, Guerrero, Guanajuato and Jalisco states and the Velazquez faction of the Gulf cartel's conflict with Los Zetas in northern and central Mexico.

While no criminal organization in Mexico suffered any substantial losses in capabilities or territory in the third quarter, the fourth quarter will likely see variations in this trend, particularly as cartels adjust to the arrest of Mario Ramirez Trevino. The Velazquez faction will become the widest-operating branch of the Gulf cartel and the most active challenger to Los Zetas for control of the northeast. As Stratfor noted during our first quarterly update, the Velazquez faction was formerly led by the now-captured Ivan "El Taliban" Velazquez Caballero, a former regional boss for Los Zetas, which split from Los Zetas around March 2012 and later returned to operating under the Gulf cartel name. The Velazquez faction continues to operate unhindered by the arrest of Ivan Velazquez on Sept. 26, 2012.

There are a variety of reasons for the relatively stable cartel dynamics in Mexico during the third quarter. For one, it has been less than three months since Miguel Trevino was detained by the Mexican navy and less than two since Mario Ramirez's detention. Miguel Trevino's brother, Omar Trevino, appears to have assumed leadership over Los Zetas, and -- notably -- there has been no significant challenge to his new role. Mario Ramirez's arrest will certainly alter the dynamic within the umbrella of the Gulf cartel, particularly as it relates to Gulf allies such as the Knights Templar and the Sinaloa Federation, and Gulf rivals, such as Los Zetas. Any changes related to dynamics within the Gulf cartel have yet to be reflected in open source reporting.

Also, the balkanization of Mexican organized crime has shifted the focus of all criminal organizations from planning new incursions to addressing existing challenges within their territory. The Sinaloa Federation continues to combat regional rivals in northwestern Mexico, including northern Sinaloa, southwestern Chihuahua, and northern Sonora state. Los Zetas continue their fight to regain complete control over much of Zacatecas state after Velazquez Caballero's split in 2012. Los Zetas also continued to engage in violent attacks against the Gulf cartel in the rest of northeastern Mexico and against the Knights Templar (and possibly Gulf cartel) in Tabasco state, although these offensives have not accomplished any real gains. The Cartel de Jalisco Nueva Generacion and the Knights Templar continued to focus on their traditional strongholds in southwestern Mexico, trading tit-for-tat incursions into one another's territories.

Moreover, many of the changes in cartel dynamics reported in the third quarter actually occurred during the first quarter. For example, Stratfor first identified the arrival of a new challenger to Los Zetas into Tabasco state operating under the name People United Against Crime (commonly referred to by its Spanish acronym, PUCD), but during the second and particularly third quarter it became apparent that People United Against Crime are really just pre-existing Zetas rivals operating under a new label (most likely the Knights Templar or its allies, the Velazquez faction of the Gulf cartel). And it came to light in the third quarter that Los Zetas have entered the Ciudad Juarez area in northern Chihuahua, though they actually began building their presence at least as far back as the first quarter.Areas of Cartel Influence in Mexico, Fourth Quarter 2013

In contrast to the minimal disruptions in the overall cartel landscape in Mexico in the past two quarters, the fourth quarter will likely see substantial changes. The Gulf cartel will likely feel the effects of Mario Ramirez's capture, which will shift the balance of power in Tamaulipas state and thus invite another offensive by Los Zetas or further control by Gulf allies, particularly the Knights Templar. Meanwhile, should Omar Trevino be capable of retaining the organization's ability to stage significant incursions into Sinaloa Federation territory, Los Zetas efforts in Ciudad Juarez could spark a new turf war in Chihuahua state.Overall Violence

Los Zetas

After the July 15 capture by the Mexican navy of top Zeta leader Miguel "Z-40" Trevino Morales, his brother Omar "Z-42" Trevino ascended to the top position within the criminal organization. Thus far, it does not appear that anyone within Los Zetas has publicly challenged Omar Trevino.

Many of the challenges to Los Zetas by rivals during the second quarter continued into the third quarter. While efforts by the Velazquez faction of the Gulf cartel to seize Zetas territory were renewed in part because of Miguel Trevino's capture, primarily affecting Zacatecas state and southern Tamaulipas state, the renewed fighting is only a continuation of the dispute that began after the former leader of the Velazquez faction, Ivan "El Taliban" Velazquez Caballero, split from Los Zetas around March 2012. Elsewhere, Los Zetas have been unable to mitigate challenges for territorial control in some regions, a trend that emerged before Miguel Trevino's arrest.

Tamaulipas and Zacatecas states remain the most critical areas to follow in assessing the integrity and capability of Los Zetas, particularly Nuevo Laredo, Tamaulipas state. This is due to the value of Nuevo Laredo to Los Zetas' operational capabilities and to the Velazquez faction of the Gulf cartel being the most active and closest rival of Los Zetas in geographic proximity to Nuevo Laredo. While the Velazquez network operates along the entire eastern coast of Mexico, its center of operations remains in northern and central Mexico, including Zacatecas, Coahuila and San Luis Potosi states; its reach extends into southern Tamaulipas and Nuevo Leon states (specifically Monterrey) thanks to its ties to other Gulf cartel factions.

With the exception of Zacatecas during September, however, there have been no indications that such violence has yet posed a substantial threat to Los Zetas operations in the aforementioned states. The lack of change in criminal activities in Nuevo Laredo, including inter-cartel violence, has been most notable in the Los Zetas-Gulf cartel competition. This suggests Los Zetas' rivals have yet to find the opportunity to mount another incursion against them.

Los Zetas have thus far maintained their capabilities in terms of drug smuggling and other criminal activity plus the ability to defend against their rivals despite the loss of their top leader, and the organization continues to operate deep into rival territory. During the third quarter of 2013, it became apparent that Los Zetas have been operating in the Sinaloa Federation-controlled territory of northern Chihuahua state, most notably in Ciudad Juarez, via its allies La Linea and Los Aztecas (both former enforcer groups of the Vicente Carrillo Fuentes organization, better known as the Juarez cartel). Los Zetas are funding and training both groups, but they have yet to operate in an offensive manner in Ciudad Juarez at present.

However, Los Zetas have been using the area for their trafficking operations into the United States, particularly southeastern Ciudad Juarez. In exchange for support, Los Zetas can operate in areas still controlled by La Linea around Ciudad Juarez, helping to avoid an overt conflict with the Sinaloa Federation. Stratfor has received reports that Los Zetas have attempted to avoid drawing attention to their presence by eschewing violent acts. Although Los Zetas' presence in the area only became apparent in the third quarter, it had begun prior to the arrest of Miguel Trevino.

Although Los Zetas do not overtly appear to have suffered any substantial losses in operational capabilities since Miguel Trevino's arrest, uncertainties persist about whether his brother, Omar Trevino, can successfully manage one of the two largest criminal organizations in Mexico. These uncertainties make it difficult to forecast Los Zetas' strategy and the potential challenges that could lead to a degraded security climate in its own and rival territories. Should the Gulf cartel in Zacatecas state make progress in its territorial dispute with Los Zetas, rivals to Los Zetas would likely vie for territory closer to Nuevo Laredo, probably leading to an increase in violence. Additionally, should Los Zetas try to use their established presence in Ciudad Juarez to attempt a takeover from the Sinaloa Federation, violence in Chihuahua would likely increase drastically.

Gulf Cartel

The Gulf cartel suffered yet another substantial blow to its leadership during the third quarter with the capture of its most powerful leader, Mario "El Pelon" Ramirez Trevino, on Aug. 17. This arrest will likely lead to further tumult within the Gulf cartel, which had already devolved from a cohesive criminal organization into an umbrella group with factions loyal to individual leaders but operating on a transnational level.

The fall of Ramirez will likely propel the Velazquez faction of the Gulf cartel to become one of the most powerful Gulf cartel factions in the northeast during the fourth quarter, barring any unforeseen captures or deaths at the hands of Mexican authorities. This is because the Velazquez faction maintains the widest geographic reach in Mexico under a cohesive network. The leadership of the Velazquez faction since the arrest of Ivan Velazquez in September 2012 remains something of a mystery, though likely successors include two of his brothers, Daniel "El Talibancillo" Velazquez Caballero and Rolando "El Rolys" Velazquez Caballero.

The most significant change resulting from Ramirez's capture during the fourth quarter will likely be yet another reshuffle of allegiances and roles among Gulf cartel factions in addition to Ramirez's replacement. This will include another split within the Gulf cartel umbrella, assimilation at some level of Gulf cartel cells into existing factions or an external organization such as the Knights Templar and even Los Zetas, and an increased presence of the Knights Templar or the Sinaloa Federation in Tamaulipas state, both of which have thus far propped up the Gulf cartel in its conflict with Los Zetas. Of the current Gulf cartel factions, the Velazquez faction will become the most formidable rival of Los Zetas in the northeast.

Knights Templar and Cartel de Jalisco Nueva Generacion

While the northeastern states of Mexico are typically the most fluid in terms of cartel dynamics and security due to the Zetas-Gulf cartel conflict, violence as a result of the ongoing dispute between the Cartel de Jalisco Nueva Generacion and the Knights Templar turned southwestern Mexico, particularly Guerrero, Michoacan and Jalisco states, into the most active in terms of inter-cartel violence.

As stated during our first quarterly update of 2013, the Cartel de Jalisco Nueva Generacion has made a substantial bid to wrest control of the Knights Templar stronghold of Michoacan state. With community police in southwestern and northern Michoacan state a contributing factor, inter-cartel violence escalated dramatically during the third quarter and will likely continue at present levels or even escalate further during the fourth quarter.

This has placed the Knights Templar on the defensive, something made apparent by their escalated aggression against authorities during the third quarter and the shifting of the focus of their propaganda from Los Zetas to both the Cartel de Jalisco Nueva Generacion and the community police. Despite this, the Knights Templar probably will not lose substantial territory in Michoacan state nor lose their ability to resist the Cartel de Jalisco Nueva Generacion incursion during the fourth quarter. The Knights Templar are simply firmly planted in Michoacan. The conflict will continue to pose a substantial security threat throughout the state.

Sinaloa Federation

With the exception of Los Zetas in Ciudad Juarez, little has changed during the third quarter regarding the Sinaloa Federation. As Stratfor has noted, the Sinaloa Federation has been dealing with regional conflicts within its territory in the northwest. This includes the golden triangle region (encompassing northern Sinaloa, northwestern Durango and southwestern Chihuahua), northern Sonora state and southern Chihuahua state. These conflicts continued over the third quarter and will likely remain on course throughout the fourth quarter. None of the existing conflicts will present any serious challenge to the Sinaloa Federation's territorial control or criminal operations during the fourth quarter.

As mentioned above, Los Zetas have built up a presence around Ciudad Juarez during 2013, potentially marking a new criminal aggressor in Ciudad Juarez. The city already has seen a turf war between the Sinaloa Federation and the Juarez cartel and its allies, La Linea and Los Aztecas, since 2008. Thus far, Los Zetas' presence in Ciudad Juarez has largely been nonaggressive, and they have apparently limited their operations to trafficking drugs into far western Texas.

The Sinaloa Federation lost a prominent lieutenant overseeing the region, Gabino "El Ingeniero" Salas Valenciano, on Aug. 8 when Salas died in a firefight with the Mexican army. While no public reports suggest that Los Zetas are attempting to take advantage of his death by striking against Sinaloa interests, it is clear that Salas' death has triggered some conflict between La Linea and the Sinaloa Federation. On Sept. 22, gunmen opened fire on a family celebrating a local baseball game in Loma Blanca, a community located in southeastern Ciudad Juarez. Ten people died in the attack. While the identity and motive of the shooters remain unknown, some Mexican news agencies have attributed the killing to La Linea. Soon after the shooting, authorities discovered messages in at least eight locations in Ciudad Juarez attributing the shooting to La Linea. Notably, the messages were signed "the people of Gavino (sic) Salas."

While such messages cannot alone confirm the identity of the attackers or suggest a motivation, they do suggest at least a momentary escalation of violence between the Sinaloa Federation and La Linea. Such a renewed violent campaign could present a moment of opportunity to persuade their allies to attempt to wrest Ciudad Juarez from the Sinaloa Federation -- a scenario that would certainly lead to a sharp uptick in violence through Ciudad Juarez and possibly much of northern Chihuahua.

Vigilantes line up during a program to register their weapons and create a rural police in Paracuaro in Michoacan state, Mexico, last Monday. The government has proposed incorporating some vigilantes into a rural police force and giving them formal training. Reuters

MEXICO CITY—Hundreds of vigilantes in the southwestern Mexican state of Michoacán, escorted by the military and federal police, on Saturday moved into the city of Apatzingán, the main bastion of the Knights Templar criminal organization.

The vigilantes, working alongside federal forces, set up checkpoints on roads in and out of Apatzingán in search of members of the Knights Templar.

Francisco Castellanos, a local journalist in Apatzingán, said that as of midafternoon Saturday, the operations had been carried out without reports of clashes or shots being fired.

The heavily armed vigilantes, known locally as self-defense groups, had been expanding and taking control of a number of towns and municipalities in largely rural areas of Michoacán state to kick out the Knights Templar. Named after a medieval order of warrior monks, the Templars evolved from trafficking in marijuana and methamphetamines to extortion, kidnapping and murder.

The Templars' abuses and the government's inability to stop their reign of terror sparked a reaction, mostly by lime and avocado growers, cattlemen and shopkeepers, many of them former U.S. migrants (!!!) who organized vigilante organizations to take back control of the towns from the organized crime group.

A year ago, the vigilantes ran the Templars out of two towns in the Tierra Caliente, a swath of rich agricultural land, gathering strength from their victories. The movement continued to spread. The growing danger of open armed conflict between the two organizations led the Mexican government to step up the presence of troops and federal police in the state. In January, federal forces took control of Apatzingán as the vigilante groups were planning to move in.

A government official who spoke on condition of anonymity said the federal government didn't see Saturday's moves as an "advance" of the self-defense groups or an "occupation" of Apatzingán. He said the cooperation between federal forces and the local communities, including self-defense members, is essential for the government to recover lost trust in the state.

The international focus on the proliferation of self-defense groups and growing violence in Michoacan has embarrassed the Mexican government, which has emphasized its efforts to reform the country's economy, including opening up Mexico's energy industry to private investment.

Mexican President Enrique Peña Nieto last month appointed as special envoy a close political ally, Alfredo Castillo, who became Michoacan's de facto acting governor with special powers to implement economic and security measures. Mr. Castillo was ordered to dismantle the Templar organization and disarm the self-defense groups.

Last week, the government announced an ambitious plan to spend $3.4 billion to boost the Michoacán economy, and improve the state's social services. The vigilante groups had said disarming would leave their communities open to revenge attacks by the Templars. But late last month, they reached agreement to form into rural and town police forces. Alejandro Hope, a security expert with the Mexican Institute for Competitiveness, a think tank, questioned the wisdom of allowing the vigilantes to enter Apatzingán after the government had sought to contain their advance.

"If the federal forces were already there, why did they [the vigilantes] have to go in?" he said.

Guzman's beauty queen wife went to LA to give birth to twins. So now his kids are automatic US citizens. This is just crazy. Folks, the joke is on every law abiding American. Why do we have to be so stupid?:

Editor's Note: This week's Security Weekly summarizes our quarterly Mexico drug cartel report, in which we assess the most significant developments of the first quarter of 2014 and provide a forecast for the second quarter of the year. The report is a product of the coverage we maintain through our Mexico Security Memo, quarterly updates and other analyses that we produce throughout the year as part of the Mexico Security Monitor service.

By Tristan ReedMexico Security Analyst

During the first quarter of 2014, Mexican authorities managed to kill or capture a substantial number of high-level leaders of Mexican organized criminal groups, including top Sinaloa Federation leader Joaquin "El Chapo" Guzman Loera on Feb. 22 at a hotel in Mazatlan, Sinaloa state. In an unusually high tempo of operations, the Mexican military managed to capture several other Sinaloa leaders who operated under Guzman or Ismael "El Mayo" Zambada Garcia, another top-tier Sinaloa Federation leader. By the beginning of 2014, the Sinaloa Federation was already struggling to adapt to a series of significant leadership losses during the last quarter of 2013. Its losses during the first quarter of 2014 thus compound its pre-existing problems.

Meanwhile, the efforts of federal troops and the self-defense militias in Michoacan resulted in the death or capture of the bulk of the Knights Templar's top-tier leaders. Since the second half of January 2014, three out of four of the most prominent Knights Templar leaders have been eliminated, as have many of their lieutenants.

The arrest of Guzman is not likely to alter any of the trends during the second quarter addressed in our 2014 annual cartel report. By contrast, the massive losses for the Knights Templar in such a short period will likely trigger substantial shifts in organized crime dynamics in Michoacan, including the expansion of old or the creation of new, smaller criminal groups into the void left by the Knights Templar. Given that the Knights Templar were expanding domestically and internationally up to the end of 2013, the impact of successful federal operations against the group could be felt beyond southwestern Mexico. This is particularly likely in northeastern Mexico, where the Knights Templar helped the Gulf cartel defend its territory from Los Zetas. If this evolution does not occur during the second quarter, it probably will later in 2014.Michoacan

Federal authorities could not have racked up such rapid successes against Knights Templar leaders during the first quarter were it not for the presence of self-defense militias in Michoacan state. The self-defense militias first emerged in February 2013 and have since expanded their operations to more than 26 of Michoacan's 113 municipalities (and over half the state's geographic area). Even so, Mexico City has decided it cannot tolerate the existence of well-armed and widely operating militias willing to supplant government authority.

At the end of 2013, self-defense militias in Michoacan had already expanded into nearly a dozen municipalities as part of a strategy of ejecting the Knights Templar from specific areas and then holding onto the newly won territory. With the expansion, the militias challenged government authority in many towns by taking charge of public safety, often detaining local law enforcement authorities whom the militias viewed as having links to the Knights Templar. The growing presence of the militias presented yet another substantial security challenge for Mexico City in the state, particularly as the militias expanded around the transportation routes surrounding the port city of Lazaro Cardenas. Rising levels of organized crime-related violence, the continued expansion of well-armed militias into much of the state and disruptive violence such as the Oct. 27 attacks on Federal Electricity Commission installations in Michoacan prompted several deployments of federal police and the Mexican military to Michoacan throughout 2013 (in addition to drawing international media coverage of Michoacan's security woes).Cities With Self-Defense GroupsClick to Enlarge

In January 2014, Mexico City created the Commission for Security and Integral Development in Michoacan, led by Alfredo Castillo, to oversee its security strategy in Michoacan, coordinate federal and state security forces and purportedly address political, social and economic issues in the state. One of the commission's first actions was to bring the various militias, operating in a coordinated manner, into an agreement with the federal and state government Jan. 27. Among other things, the self-defense groups agreed to integrate with federal troops by joining the Rural Defense Corps, a longtime auxiliary force of the Mexican army. In addition, the agreement provided Mexico City with greater oversight over the inner workings of the militias and their leadership. However, no substantial integration of militia members into the Rural Defense Corps had occurred by the end of the first quarter.

By contrast, the agreement did succeed in fostering a great deal of cooperation between the militias and federal troops with regard to targeting the Knights Templar. The combined efforts of the self-defense militias and federal troops against the Knights Templar yielded substantial gains. The day of the agreement, federal troops captured Dionisio "El Tio" Loya Plancarte, the first of the top Knights Templar leaders to fall in the first quarter. On March 9, the Mexican military killed Nazario "El Chayo" Moreno Gonzalez, the founder of the Knights Templar, in Tumbiscatio, Michoacan state. Moreno's death occurred as a result of substantial militia operations in the city just days before. On March 31, top leader Enrique "El Kike" Plancarte Solis was killed during a military operation in Colon, Queretaro state. Of the Knights Templar's best-known leaders, only Servando "La Tuta" Gomez Martinez remains at large.Municipalities With Self Defense GroupsClick to Enlarge

Significantly, the spread of the militias in Michoacan has greatly hindered the group's mobility in the state. This greatly diminished the operational capabilities of the Knights Templar during the first quarter, lessening its hold over profitable criminal activities in the state. And this in turn has created a power vacuum, allowing smaller independent crime groups, including the remnants of the Knights Templar, to emerge. (The second quarter will likely see these lower-tier groups continue to emerge.)

In the weeks following the March 31 death of Plancarte, the federal commission overseeing Michoacan's security developments called for the disarmament of the militias because, the commission said, the Knights Templar had largely been defeated. Self-defense militia movement spokesman Jose Mireles rejected calls to disarm, citing the persistence of the Knights Templar under Gomez and other lower-level bosses.

The federal government then set a deadline of May 10 for the militias to voluntarily disarm or face forced disarmament. In response, the militia movement threatened blockades. Various militias could erect these, presumably on major roads in Michoacan, should the federal government not satisfy militia demands. These include the release of 100 incarcerated militia members, the killing or capture of remaining Knights Templar members in the state, the restoration of the rule of law in Michoacan and the recognition of the self-defense militias' right to exist.

The commission and militia leaders from 20 municipalities struck a new deal April 14. Though the agreement followed a recent ultimatum by the federal government that the militias voluntarily disarm by May 10 or have federal troops forcibly disarm them, the new deal's 11 points do not call for a total disarmament. Instead, the militias accepted an offer to be incorporated into a Rural State Police body beginning May 11. Under the terms of the deal, self-defense militias will turn in "high-caliber" weapons. The deal calls for all remaining militia arms to be registered with the federal government. The April 14 agreement also allows militia members to join the Rural Defense Corps, just as the agreement signed Jan. 27 did.

According to Security and Integral Development Commissioner Alfredo Castillo, the agreement means that self-defense militias in Michoacan will disappear by May 11. Whether the agreement will actually produce that outcome remains unclear, given that it allows the self-defense militia members to continue to bear arms and does not specify just how the militias will be formally integrated into government-controlled security forces. Moreover, divisions within the militia movement could threaten the viability of the April 14 agreement.

The April 14 agreement highlights the federal government's intent to halt the expansion of vigilante groups in Mexico. The challenge to governmental authority apparently has been deemed greater than the benefits the militias bring of reducing the need for military involvement in the fight against drug-trafficking organizations.

To this end, Mexico City has sought to bring the militias to the bargaining table. But implementing any deal will face a challenge from increased divisions among the militias. Although at present the militias mostly act in concert, the movement comprises various militias operating in towns among dozens of municipalities.

Internal discord has already emerged, albeit currently isolated to a few personalities within the militias. Since the beginning of 2014, various self-defense militia leaders have accused one another of belonging to organized crime and have said that organized crime is infiltrating their groups. Though such claims are impossible to verify, their existence underscores concerns among self-defense militias that their members may be interested in taking over criminal enterprises left by the power vacuum that emerged from the Knights Templar's decline. If these concerns become reality, the government will face an even more fractured militia landscape during negotiations for their incorporation into federal forces.

If the broader movement fractures during the second quarter, the likelihood of any negotiated settlement between the militias and the government greatly diminishes, given the lack of any coordinated leadership. However, divisions within the militia movement would pose a diminished threat to Mexico City. If the movement remains largely intact yet fails to honor the April 14 agreement, it is possible that Mexico City would still delay any efforts to disarm the militias during the second quarter. This would provide more time for the militias to fragment, thus reducing their collective ability to challenge state authority while obviating the need for any military confrontation. However, such a decision would risk further proliferation of the militias, bringing in more weaponry and bolstering their ranks. The longer Mexico City allows the militias to expand without any permanent resolution that brings the militias fully into the fold or disarms them, the greater the threat militias will pose to government authority.

In the second quarter, the fracturing of organized crime in Michoacan will likely lead to more organized crime-related violence as these smaller groups move, hampering federal and state government bids to improve security in the state. And although Knights Templar operational capabilities in Michoacan have declined, the group will still retain a substantial presence in the state during the second quarter. Violence between rival criminal organizations and between criminal organizations and the self-defense militias will combine with the continued presence of the Knights Templar to keep the state unstable.

Editor's Note: The full version of our quarterly cartel update is available to clients of our Mexico Security Monitor service.

Since the second half of January 2014, three out of four of the most prominent Knights Templar leaders have been eliminated, as have many of their lieutenants. Federal authorities could not have racked up such rapid successes against Knights Templar leaders during the first quarter were it not for the presence of self-defense militias in Michoacan state. The self-defense militias first emerged in February 2013 and have since expanded their operations to more than 26 of Michoacan's 113 municipalities (and over half the state's geographic area). With the expansion, the militias challenged government authority in many towns by taking charge of public safety, often detaining local law enforcement authorities whom the militias viewed as having links to the Knights Templar.

Mexico City has decided it cannot tolerate the existence of well-armed and widely operating militias willing to supplant government authority, which led to the government and militia leaders from 20 municipalities striking a new deal April 14 to resolve their status. Though the agreement followed a recent ultimatum by the federal government that the militias voluntarily disarm by May 10 or have federal troops forcibly disarm them, the new deal's 11 points do not call for a total disarmament. Instead, the militias accepted an offer to be incorporated into a Rural State Police body beginning May 11. Under the terms of the deal, self-defense militias will turn in "high-caliber" weapons. The deal calls for all remaining militia arms to be registered with the federal government. The April 14 agreement also allows militia members to join the Rural Defense Corps, just as a previous agreement reached Jan. 27 did.

According to Security and Integral Development Commissioner Alfredo Castillo, the agreement means that self-defense militias in Michoacan will disappear by May 11. Whether the agreement will actually produce that outcome remains unclear, given that it allows the self-defense militia members to continue to bear arms and does not specify just how the militias will be formally integrated into government-controlled security forces. Moreover, divisions within the militia movement could threaten the viability of the April 14 agreement.

Editor's Note: This Security Weekly is a condensed version of a report on travel security in Mexico. The full version is available to subscribers to our Mexico Security Monitor service, which also includes our Mexico Security Memo, quarterly cartel updates and other analyses throughout the year.

By Tristan Reed

Many people who visit Mexican resort areas during North America's spring break season ignore travel warnings, meaning they may not be aware of the threat posed by transnational criminal organizations, more commonly known as cartels. Since 2012, cartel violence has spread from the northern border regions of Mexico south into Mexican states hosting popular destinations for spring break travelers. Nothing in the behavior of Mexican cartels indicates that they would consciously keep tourists out of the line of fire.

Learn more about travel security in our seven-part series.

While most of the approximately 150,000 U.S. citizens who travel to Mexico each day do so without incident, tourists are by no means immune to cartel violence or even common crime. Mexico's criminal cartels are more than just drug traffickers -- they participate in extortion, robbery, kidnapping and carjacking. And where cartels are fighting each other violently, local gangs are able to take advantage of law enforcement's resulting distraction to commit crimes of their own. We will explore the nature of the risk from cartel and ordinary violence before giving an in-depth review of select major tourist destinations.Cartel Crime

For more than two decades, Mexico's criminal cartels have fought each another for control of drug trafficking operations in various parts of Mexico. Cartel turf wars typically focus on specific drug trafficking routes, ports of entries into the United States along Mexico's northern border towns and areas where illicit drug production and cultivation are concentrated. Mexico's cartels increasingly have turned to other criminal activities to fund the defense of their territories from potential rivals. Such operations include human smuggling, kidnapping, extortion, counterfeiting goods and hydrocarbon theft. This diversification has seen turf wars break out in resorts.

While cartels typically direct their violence toward rival groups, outside parties often wind up in the crossfire. In one instance, gunmen belonging to a faction of the Gulf cartel opened fire on a bar in Cancun, Quintana Roo state, on March 14, 2013, killing seven people and wounding five others. Though the gunmen were targeting three leaders of a taxi union in Cancun, they were clearly unconcerned by the presence of bystanders. Similarly, five students in Reynosa, Tamaulipas state, were killed Dec. 19, 2013, after a vehicle carrying cartel gunmen fleeing the Mexican army struck the group. And in probably the most extreme example, Los Zetas set fire to the Casino Royale in Monterrey, Nuevo Leon state, on Aug. 25, 2011, allegedly in an effort to send a message to the casino's owner. More than 50 patrons and staff died in the blaze.

In the past decade, violence in Mexico escalated nearly every year, from 25,133 overall homicides in 2007 to 38,052 in 2012, according to the National System of Public Safety, though 2013 saw a drop to 34,648. Years of law enforcement and military efforts to contain cartel violence have allowed already-high levels of other crimes, many of which could affect tourists, to persist or even rise. For example, 1,407 kidnappings were reported in 2012 versus 1,702 in 2013, the highest level since at least 1997, according to the National System of Public Safety. Since most kidnappings in Mexico go unreported, the true number is likely much higher.

Much of the reduction in homicides in 2013 can be attributed to the continued decline of turf wars in what were once among Mexico's most violent states -- places such as Chihuahua, Coahuila, Nuevo Leon and Tamaulipas. At the same time, however, cartel turf wars intensified in states farther south, including Guanajuato, Michoacan and Jalisco. These southern states contain several towns and areas popular with tourists. These conflicts are likely to continue in 2014, and they could even spread due to increased challenges to the Sinaloa Federation, whose top leader Joaquin "El Chapo" Guzman Loera was arrested Feb. 22.

Ongoing conflicts between Mexico's most powerful crime bosses and their diversifying criminal activities have resulted in growing ties between previously unaffiliated street gangs and the cartels. Cartels often hire street gangs as foot soldiers, something seen with Los Aztecas, Los Mexicles and the Artistas Asesinos in Ciudad Juarez. Los Aztecas, a Juarez cartel ally, fought against Los Mexicles and the Artistas Asesinos, which in turn were helping the Sinaloa Federation take over the Juarez plaza. As cartels continue to expand into other criminal activities, their contact with local street gangs already engaged in such crimes expands, creating alliances and, at times, new turf wars. An example of the latter is Los Pelones' turf war with Los Zetas and the Gulf cartel in Cancun. While cartels may not specifically target foreigners, more localized criminal actors often see tourists as potential targets. In any case, the dividing lines between cartel and local gang activity have become increasingly blurred.Local Crime

Common criminals belonging to a local gang or acting alone are more likely than cartel enforcers to target foreigners in Mexico. But the presence of cartels, especially in areas where multiple cartels are engaged in competition, causes a deterioration of security conditions that lends itself to the formation of local gangs. These local gangs may not be affiliated with the cartels, but still present many of the same security concerns: Like the cartels, they may be involved in killings, extortion, carjacking, sexual assaults and kidnappings, and they may cause collateral damage.

According to a Jan. 9, 2014, travel warning update by the U.S. Department of State, Tamaulipas state witnessed a 75 percent increase in kidnappings of U.S. citizens in 2013. (The actual number of incidents was not reported). The same travel warning stated that the U.S. Embassy in Mexico City received reports of 90 U.S. citizens kidnapped throughout Mexico between April and November 2013.

Citizens of many countries have fallen victim to such crime. For example, a gang targeted Spanish tourists in a bungalow on Feb. 4, 2013, in Acapulco, Guerrero state, binding and robbing the males before sexually assaulting the females. In the same part of Acapulco, a gunman shot and killed a Belgian national in a parking lot in the Diamante tourist zone on Feb. 23, 2013. Authorities discovered the victim's body next to his vehicle with a gunshot wound to the chest and a spent .45-caliber casing nearby. And sometime after Jan. 25, 2014, a U.S. citizen who had been traveling through the southwestern states of Michoacan and Guerrero was reported missing. The missing person had been headed to Zihuatanejo, Guerrero state, a popular spot with foreign travelers for fishing and surfing close to some of the most violent, and underreported, criminal turf wars in Mexico.

Kidnappings do not always follow the same pattern. They could involve anything from classic high-value target abductions to express kidnappings in which the victim can spend a week in the trunk of a vehicle as the kidnappers go from one ATM to the next withdrawing all the money in the victim's account. They even include so-called virtual kidnappings, a technique by which perpetrators falsely claim to have kidnapped someone to extract a ransom from a friend or relative of the victim. Reports of virtual kidnappings in Mexico have become more frequent, even in popular resort destinations such as Cancun.

While there are examples of groups such as the Gulf cartel and Los Zetas participating in kidnappings throughout the country, localized kidnapping rings that operate independently from the drug trade have flourished due to the lack of security in Mexican cities. There is little uniformity with kidnapping rings in terms of resources, targets and tactics. Though the vast majority of reported kidnapping victims have been Mexican nationals, the risk to tourists remains, especially for tourists perceived as being wealthy. The gangs' victims range from wealthy businessmen to poor farmers, so assumptions should not be made regarding their typical target set.Law Enforcement

Visitors to Mexico should not expect law enforcement officers to behave in the same way as their North American counterparts. As mentioned, law enforcement efforts in many areas of Mexico primarily are aimed at combating drug trafficking. In some cases, law enforcement officers have been found to be on the cartel payroll, forcing the Mexican military to assume law enforcement responsibilities in some areas. For example, Tamaulipas state's municipal and state police were effectively disarmed over corruption concerns, which required the military to assume the role of the state police.

As previously mentioned, the country's security services sometimes pose security risks, too. When driving, it is important to pay attention to highway roadblocks manned by military personnel and to checkpoints established to screen vehicles for drugs and cartel operatives. Police officers and soldiers have opened fire on vehicles driven by innocent people who failed to obey instructions at such checkpoints, which often are poorly marked.MexicoClick to EnlargeResorts

Many popular spring break locations foreigners perceive as having "acceptable" levels of crime have experienced violence related to the drug wars raging in Mexico. Firefights between federal police or soldiers and gunmen armed with assault rifles have erupted without warning throughout Mexico, affecting mountain villages, large cities like Monterrey, and resort towns like Acapulco and Cancun. While the cartels have not often intentionally targeted tourists, their violence increasingly has been on public display in popular tourist districts.

While there are important differences among the security environments in Mexico's various resort areas and other parts of Mexico, the country's overall reputation for crime and kidnapping is deserved. Locals and foreigners alike often become victims of assault, express kidnappings, high-value target kidnappings, sexual assaults, carjackings and other crimes.

Far more dangerous to tourists and others than government roadblocks are instances of cartel gunmen operating mobile or stationary roadblocks disguised as government troops, a well-documented phenomenon. We have not confirmed whether these have been encountered in popular resort areas, but there is the strong possibility they will be eventually, given the increased violence in major port cities. An encounter with a checkpoint or roadblock operated by gunmen disguised as federal police or military personnel can be deadly. Driving city streets in resort towns or roads in the surrounding countryside is also becoming increasingly dangerous because of such roadblocks.

Many Mexican coastal resort areas better known for their beautiful beaches also depend on their port facilities, and these have come to play a strategic role in the country's drug trade. Drug trafficking organizations use legitimate commercial ships as well as fishing boats and other small surface vessels to carry cocaine from South America to Mexico, and many cartels often rely on hotels and resorts to launder drug proceeds. Because of the importance of these facilities, the assumption has been that drug trafficking organizations seek to limit violence in such areas not only to protect existing infrastructure but also to avoid the attention that violence affecting wealthy foreign tourists would draw.

This is no longer a safe assumption. The profound escalation of cartel-related conflict in Mexico has created an environment in which deadly violence can occur anywhere, with cartels displaying complete disregard for bystanders whatever their nationality or status. As violence escalates near Mexico's resort towns, Stratfor anticipates that the cartels will not hesitate to use all tools at their disposal to defeat their opponents. Moreover, the threat to vacationing foreigners is not just the potential of being caught in the crossfire but also of inadvertently drawing the attention and anger of cartel gunmen.Acapulco

Acapulco has become one of the most violent cities in Mexico, with 143 murders per 100,000 residents during 2012. Homicides per capita dropped in 2013, but nonetheless remain high. According to Mexican nongovernmental organization the Citizen Council for Public Safety, Acapulco ranked third in the world for homicides per capita in 2013, with 113 per 100,000. Most violence related to organized crime in the city resulted from the collapse of the Beltran Leyva Organization in 2010, which spawned a set of competing organizations. In addition to conflicts between the Beltran Leyva Organization's remnant groups, such as the Independent Cartel of Acapulco and Cartel Pacifico Sur, other rival organizations such as the Sinaloa Federation, Gulf cartel and Los Zetas have competed for control of the city.

The frequent conflicts among Mexican cartels, including conflicts with authorities, have taxed authorities' ability to protect against more localized crime. Additionally, criminal actors actively seek to recruit or collude with law enforcement members. During October 2013, authorities arrested 13 federal police officers in Acapulco for working with a kidnapping gang.Cabo San Lucas

Located on the southern tip of the Baja California Peninsula, Cabo San Lucas and the Greater Los Cabos region have remained relatively insulated from the country's drug-related violence, and so are considered among the safer places in Mexico for foreign tourists. Although historically a stop on drug trafficking routes, Cabo San Lucas' strategic importance has not spawned violent competition among drug traffickers. Over the past five years, organized crime-related violence in the area has accordingly been limited.Cancun

Cancun's port remains an important transshipment point for maritime drug trafficking routes from the Caribbean basin. The high volume of tourism in Cancun makes the area a lucrative draw for localized crime such as drug dealing and theft. Until 2013, Los Zetas maintained the greatest presence in the area, occasionally fighting a local street gang, Los Pelones, for control of retail drug sales throughout Cancun, including popular resorts.

When Ivan "El Taliban" Velazquez Caballero, who oversaw Los Zetas operations in Cancun among other areas, split with Los Zetas and then rebranded his own criminal network as a faction of the Gulf cartel, he triggered more frequent organized crime-related violence in the city. This included executions, dismemberments and the targeting of law enforcement officers. After a number of arrests of the Velazquez faction of the Gulf cartel in Quintana Roo, Los Pelones in 2014 have thus far managed to take control over retail drug sales in Cancun, including the resort areas along Kukulcan Boulevard. The Gulf cartel, or even Los Zetas, could once again vie for control, which would further elevate the levels of violence in Cancun.

Recent examples of violence in the city include the killing of Gumersindo Martinez Gomez, the night operations coordinator for the Cancun police, by two gunmen early Aug. 14, 2013, outside his home on the western edge of the city. And on April 12, 2013, authorities discovered a dismembered body in three black plastic bags in the Cancun suburb of Puerto Juarez, Quintana Roo. Such incidents emphasize that cartel-related violence is not absent just because a town draws substantial tourism.Matamoros

Though Matamoros is no longer a common spring break destination, we address it because of its proximity to South Padre Island, Texas. Adventurous vacationers to South Padre Island often cross the nearby border, mainly to Matamoros and the surrounding towns clustered along the south side of the Rio Grande.

The area sees constant drug- and human-smuggling activities vital to Los Zetas and the Gulf cartel, which are ruthlessly carried out. Since the Zetas' offensive against the Gulf cartel of Matamoros in 2011, Matamoros has experienced significant violence among competing organizations and between such organizations and the military. In addition to cartel-related violence, Matamoros has experienced a surge in local crimes such as robberies and kidnappings. The U.S. Consulate in Matamoros posted a travel advisory regarding escalated kidnapping threats on Dec. 14, 2012, and on Feb. 21, 2013. For these reasons, visitors are strongly advised not to venture south into Mexico from South Padre Island.Mazatlan

Mazatlan, located about 450 kilometers (280 miles) north of Puerto Vallarta, had been perhaps the most consistently violent of Mexico's resort cities during the past year, although 2012 and 2013 saw a substantial drop in violence. It is located in Sinaloa state, home of the country's largest cartel, the Sinaloa Federation, as well as of the rival crime group Los Mazatlecos.

Even with decreasing violence in Mazatlan, the surrounding areas have experienced notable levels of violence as a result of incursions by Los Zetas and Los Mazatlecos into southern Sinaloa state. Such violence may increase in frequency as rivals of the Sinaloa Federation attempt to capitalize on perceived Sinaloa weaknesses after the Feb. 22 arrest of Joaquin "El Chapo" Guzman Loera in a condominium in Mazatlan.Puerto Vallarta

Several of Mexico's largest and most powerful cartels maintain a trafficking presence in Puerto Vallarta, Jalisco state. Though violence related to organized crime is much less frequent than in other areas beset by criminal turf wars, it is still present in Puerto Vallarta and thus presents risks to bystanders.

Gunmen opened fire on a vehicle carrying three passengers, killing two and critically wounding the third, early Oct. 17, 2013, in the Romantic Zone in Puerto Vallarta. Gunmen in two trucks cut off the victims' vehicle at the intersection of Emiliano Zapata and Venustiano Carranza streets before opening fire. At least 35 rounds struck the victims' vehicle, killing two occupants, who were brothers. The tactics and the number of rounds fired suggest the killing was a targeted hit by an unidentified organized criminal group.

As stated, unrelated crime tends to appear wherever criminal organizations compete for turf, and Puerto Vallarta is no exception. Thus, in August 2013 burglars killed a U.S. citizen living in Puerto Vallarta. His body was discovered after his maid, who was tied up during the robbery, managed to escape and alert authorities.

Threats from kidnapping gangs or other criminal groups also are said to be lower in this resort city than in the rest of the country. Still, a February 2012 incident illustrated why caution and situational awareness should always be exercised: A group of 22 tourists ventured off their cruise ship to tour El Nogalito, an area near Puerto Vallarta, where they were held at gunpoint and robbed.

Editor's Note: An earlier version of this report misstated the number of U.S. visitors to Mexico.

National Electoral Institute (INE) data released on 11 July 2014 from June shows that the National Action Party (PAN) has just 222,928 members, after discovering that 48,704 registrations were duplicates. This puts PAN at risk of losing its status as a national political party, as electoral law dictates that a recognized national political party have a minimum number of members equivalent to 0.26 percent of the population, or approximately 219,608 citizens. The INE will now crosscheck the registrations of the other political parties and, if necessary, request that citizens express their final preference.

Mexican President Enrique Pena Nieto's state of the union address Tuesday offered key insights into Mexico's direction over the next few years. Among the high points of the speech were reforms in the Mexican energy sector that ended the state's monopoly on hydrocarbons production. Pena Nieto's speech also touted reductions in the nation's homicide rate over the past year.

With the legislative hurdles cleared, Mexico will use the next few years to implement reforms achieved in 2013 and 2014. The energy reform in particular portends an increase in Mexican oil output and government revenue over the next decade. Mexico will also continue using federal authorities, including the newly formed gendarmerie, to counter the violence generated by organized crime. However, these are short-term political moves in Mexico's larger geopolitical narrative, in which Mexico's economic future will remain inextricably connected to the United States, and Mexico City will continue searching for ways to mitigate ongoing competition between drug trafficking organizations.

To a large degree, Pena Nieto will focus his presidency on maintaining the steady economic growth of the past 20 years. Since the implementation of the North American Free Trade Agreement in 1994, Mexico's real gross domestic product climbed by about $383 billion to more than $1 trillion. This growth, which placed Mexico second in Latin America in terms of GDP and 15th in the world, primarily rose due to the advantages gained by Mexico's proximity to the United States. Mexico has defined its economic strategy around these advantages, which include short transport distances to the world's largest consumer market and Mexico's relatively low wages compared with the United States -- low wages that have spurred investment into manufacturing (with the United States being a leading investor) for decades. NAFTA accelerated this trend, and nearly 80 percent of Mexican exports worth some $300 billion went directly to the United States in 2013. Although Mexico is attempting to eliminate tariff barriers with like-minded trading partners in the burgeoning Pacific Alliance, its trade flows will remain overwhelmingly focused on its neighbor to the north.

What is a Geopolitical Diary? George Friedman Explains.

This long-term economic focus northward will define Mexico's immediate economic moves. Over the next several years, Mexico will continue building out its natural gas pipeline network to take advantage of the U.S. role as a major natural gas producer and supply Mexico's growing industrial base and electricity generation. Because the pipelines that import U.S. natural gas into Mexico are operating near full capacity, Mexico will add three additional pipelines to its grid over the next two years. Mexican state-owned energy firm Petroleos Mexicanos is planning five additional pipelines in upcoming years. Together, these lines will add nearly 55.9 billion cubic meters per year to Mexico's existing pipeline import capacity.

Mexico will also focus heavily on implementing the centerpiece of its reform drive, namely, energy reform. Much of Pena Nieto's political legacy rests on successfully securing meaningful foreign investment into Mexico's oil sector. To this end, the government will auction 169 oil blocks in May 2015. There are growing indications that Pemex is willing to make the necessary moves to restructure the firm to become more competitive. A successful auction is unlikely to bear fruit until several years down the road, but it would set Mexico's deteriorated oil sector on the path toward recovery.

Pena Nieto will also continue dealing with the ongoing violence from Mexico's drug war, an unwelcome inheritance from his predecessor, Felipe Calderon. Mexico remains one of the last destinations in the cocaine supply chain to the lucrative U.S. market, and this role will not change soon. Despite rising cocaine traffic through the Caribbean, the vast majority of cocaine shipments from South America still pass through Mexico -- and thus into the hands of the numerous drug trafficking organizations competing there for dominance over supply routes northward. This violence, which spiked sharply in the years after Calderon sent federal forces directly after drug trafficking organizations in 2006, has remained a challenge for the Mexican government. The government will continue to try to contain the violence associated with criminal competition, and the U.S. interest in stemming the flow of drugs through the U.S. border is unlikely to wane in the coming years.

Despite a major U.S. interest in countering drug flows north, Mexico will likely enjoy significantly less success on the security front. There are simply too many people within criminal organizations and institutions benefiting from the drug trade for its effects to be reduced through law enforcement pressure alone. Although several major drug traffickers were captured during Pena Nieto's term, including Sinaloa Federation leader Joaquin "El Chapo" Guzman Loera and Los Zetas leader Miguel "Z-40" Trevino Morales, the elements remain in place for continued cartel wars across Mexico. The lucrative profit margins available to Mexican drug traffickers will keep spurring competition over supply routes and gateways into the United States. Though the names of individuals and organizations involved in the trade over the next several years will change, the overall dynamic of drug trafficking organizations exporting cocaine, heroin and marijuana into the United States will not. With local police forces highly penetrated by narcotics traffickers, Pena Nieto will continue to rely on the military and other federal security bodies to stem ongoing violence, but setting up lasting law enforcement institutions will prove elusive.

Despite its lasting role in the drug trade, Mexico's future for the remainder of Pena Nieto's tenure looks bright. Reductions in U.S. consumer demand notwithstanding, the country is well-positioned to continue to benefit from high levels of foreign direct investment and trade with the United States. If successful, the energy reform will provide significant revenue flows for both the central government and private firms by the decade's end. Overall, Mexico is set to continue its trajectory toward securing its position as a Latin American economic power.

Read more: The Mexican President's State of the Union Suggests a Bright Future | StratforFollow us: @stratfor on Twitter | Stratfor on Facebook

New Candidate Jolts Mexican PoliticsA maverick former mayor is mounting a competitive bid as Mexico’s first independent gubernatorial candidate

Dudley AlthausUpdated May 22, 2015 10:03 a.m. ET

MONTERREY, Mexico—A maverick former mayor known as El Bronco is mounting a serious bid to become Mexico’s first independent candidate to win a governorship, buoyed by voter mistrust of the country’s traditional political parties.

Waging a social media campaign on a shoestring—paid for largely with the crumpled bills supporters press into his hands on the stump— Jaime Rodríguez is shaking up politics in Nuevo León, the conservative northern border state that includes the industrial powerhouse of Monterrey, and jolting politicians nationwide.

An opinion poll published Friday in El Norte, Monterrey’s leading newspaper, puts Mr. Rodríguez ahead of his rival from the ruling Institutional Revolutionary Party, or PRI, in the June 7 vote. The PRI has ruled Nuevo León for 80 of the past 86 years.

Mr. Rodríguez’s unlikely bid has emerged as one of the most watched in a midterm election for all 500 seats in Mexico’s lower house of Congress, nine governors and hundreds of state legislators, mayors and city councils.

Polls suggest that the PRI and its allies are likely to retain a slight majority in Congress. But that doesn’t mean all is well for Mexico’s ruling party.

Mr. Rodríguez, a rancher, businessman and thrice-married father of six, represents a new page in Mexican politics: the rise of independent candidates running against the traditional parties, something that was illegal until a 2014 political overhaul passed by Congress.

“This is making the political parties tremble because a candidate without a party, a structure or resources is giving them a fight,” Mr. Rodríguez, 58, said in an interview.

June’s vote takes place amid mounting voter frustration with underworld violence, a lackluster economy and corruption scandals that have hit all three major parties, especially the PRI.

President Enrique Peña Nieto and his finance minister have come under the scrutiny of Mexican and international media for property deals they made with government contractors. They both deny any wrongdoing. Civic groups have accused family members of Nuevo León’s current PRI governor, Rodrigo Medina, of illicit enrichment through dirty land deals. They deny wrongdoing.

“We have a cancer which has to be eradicated and that’s corruption,” Mr. Rodríguez said to whoops and applause at a recent stop in Monterrey’s wealthiest suburb. “I don’t want to be just one more governor, I want to change the system.”

Only 9% of Mexicans say they trust their political parties, according to a recent survey by Mexico City-based pollster GEA ISA. Only one in five is satisfied with the country’s democracy, the lowest rate anywhere in Latin America except Honduras, according to a 2013 survey of attitudes in the region by the respected Latinobarómetro firm.

Luis Carlos Ugalde, the former head of the national election agency, said he expected an independent to mount a presidential bid in 2018 national elections.

“It’s a classic kind of anti-party and antiestablishment moment,” political analyst Federico Estévez said. “The public’s mood is against the powers that be.”

Mr. Rodríguez, whose nickname El Bronco reflects his untamed style and rural roots, peppers conversations and speeches with salty language more commonly heard in fields and on factories floors than the campaign trail. While emphasizing a pro-business bent, he says he intends to improve conditions for the working poor. He elicits his biggest cheers, however, when he talks about attacking graft and corruption.

“Sooner or later you get tired of all the lies,” said Guadalupe García, a 52-year old saleswoman who was passing out literature for Mr. Rodríguez at a mountainside rally recently. “I was always with the PRI, but all the things they promise in campaigns never are fulfilled. We need something different.”

Mr. Rodríguez got a boost Thursday when another independent candidate, Fernando Elizondo, dropped out and endorsed Mr. Rodríguez. Mr. Elizondo, who was interim state governor in 2003, was polling about 4%.

Despite his narrow lead in most polls, Mr. Rodríguez still faces a difficult fight. Political power in Nuevo León recently has been shared only between the PRI and National Action. Both parties have strong political machines and loyalists whose votes prove particular crucial in elections with low turnouts.

The established parties are also heavily favored by rules that regulate independent bids at both the federal and state levels. Nuevo León’s election commission said it gave Mr. Rodríguez’s campaign only about $25,000 in public campaign funding compared with some $2 million each for his two rivals. His campaign has been apportioned 16 free television spots compared with hundreds allotted to his two rivals under federal election laws.

Consequently, Mr. Rodríguez has campaigned largely via social media, particularly on Facebook, where has more than 440,000 followers. He polls particularly well among younger and more affluent voters.

“People are disillusioned with politicians, all of them. People are very tired of the corruption,” said Eduardo Elizondo, Mr. Elizondo’s brother and son of a former Nuevo León governor.

This disillusionment has rattled some of the political elite in Monterrey and beyond.

Underscoring the importance the PRI accords the Nuevo León race, the party has dispatched some of its top political operatives to advise Ms. Álvarez’s campaign and will culminate its nationwide campaign effort at a rally in Monterrey.

PRI national leader César Camacho has accused Mr. Rodríguez of incompetence and has joined other critics in saying he is surpassing legal campaign spending limits. “We want legality and fairness to continue being the constant in the Nuevo León election,” Mr. Camacho said in a recent news conference.

Mr. Rodríguez has rejected such accusations from PRI officials and others as desperate attempts to hobble his rise in the polls.

Former Mexican President Felipe Calderón, a lifelong National Action member, likened Mr. Rodríguez to Venezuela’s late populist Hugo Chávez, whose 1998 presidential election destroyed traditional politics in that country and launched a socialist revolution that continues to roil it.

“Chávez also was very charismatic, very untamed and quite a bully,” Mr. Calderón said in a recent visit to Monterrey in support of his party’s gubernatorial hopeful.

Mr. Rodríguez quipped in response that Mr. Calderón must have been “drunk” or “hung-over” when he made the comparison. Mr. Calderón retorted via Twitter that the comment proved his point about Mr. Rodríguez’s intolerance.

Mr. Rodríguez seems an unlikely revolutionary. He spent more than three decades in the PRI, serving as a party boss, state bureaucrat and federal congressman before making his name as the crime-fighting mayor of Villa de García, a violent Monterrey suburb. He bolted the party in September, saying he was fed up with party politics.

Much of Mr. Rodríguez’s attraction to voters rests on his tough-on-crime reputation.

Mr. Rodríguez has said that one of his sons, who was killed in a road accident six years ago, crashed while fleeing gangsters, and that his young daughter had to be rescued from a kidnapping. Gunmen killed his newly appointed police chief soon after Mr. Rodríguez took office as mayor in 2009, after which he survived two assassination attempts himself.

Mr. Rodríguez took on organized crime with a network of citizen informants who reported gangland activity via tweets, texts and Facebook posts. He purged his police force of officers believed to have criminal ties. He said as governor he would employ the same tactics, some of which have since been adopted by state agencies and civic groups.

“I am not Superman,” Mr. Rodríguez said at a small rally last week in a working-class Monterrey suburb. “But I can be the Lone Ranger.”

Ricardo Monreal won in the Capitol - from the Worker's Party (Partido de Trabajo). He is credited with the entrance of the Zetas in Fresnillo, Zacatecas and has far too much personal info on them and their operations, even from a politician (referencing his book - Esquradas de Muerte 'Death Squads', about the police military and cartels here)

His brothers David and Saul have accumulated much money, and one of them almost won. It is stated that their money comes directly from the cartels.

Candidates killed this election - 21.

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